Question

Golda Rush quit her job as a buyer for Home Depot to start her own hair dressing salon, Goldilocks. She gave up a salary of $40,000 per year, invested her savings of $30,000 (which was earning 5 percent interest) and borrowed $10,000 from a close friend, agreeing to pay 5 percent interest per year. In her first year, Golda spent $18,000 to rent a salon, hired a part-time assistant for $12,000 and incurred another $15,000 on equipment and hairdressing material. Based on this information, what is the amount of her implicit costs?
a) $80,000
b) $70,000
c) $42,000
d) $41,500
e) none of the above

Answer 1

Answer:

d) $41,500

Explanation:

Implicit cost is forgiven cost  = salary + interest on investment

                                               = $40,000 + $30,000*0.05        

                                               = $41,500

Therefore, The amount of her implicit costs is $41,500.