2. Masood quit his job at the bank Muscat where he earned RO 50,000 a year to start his own businesses, a Digital marketing company. He estimates his entrepreneurial talent or forgone entrepreneurial income to be OR 5,000 a year. He used RO 100,000 in savings that earned 5 percent interest annually to finance the new business. In the first year, the firm earned total revenue of OR 250,000. The spent 50,000 on purchase of machines. It pays annual rental costs of 18,000 and 80,000 for supplies. It employs 5 workers and paying each annual salary of 6000 RO. Calculate: a). The accounting profit for the new business? b). The economic profit (or loss)? Show your calculations for both questions.

2. Masood quit his job at the bank Muscat where he earned RO 50,000 a year to start his own businesses, a Digital marketing company. He estimates his entrepreneurial talent or forgone entrepreneurial income to be OR 5,000 a year. He used RO 100,000 in savings that earned 5 percent interest annually to finance the new business. In the first year, the firm earned total revenue of OR 250,000. The spent 50,000 on purchase of machines. It pays annual rental costs of 18,000 and 80,000 for supplies. It employs 5 workers and paying each annual salary of 6000 RO. Calculate: a). The accounting profit for the new business? b). The economic profit (or loss)? Show your calculations for both questions.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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