An owner can lease her building for $100,000 per year for three years. The explicit cost of maintaining the building is $35,000, and the implicit cost is $50,000. All revenues are received, and costs borne, at the end of each year. If the interest rate is 4 percent, determine the present value of the stream of:

An owner can lease her building for $100,000 per year for three years. The explicit cost of maintaining the building is $35,000, and the implicit cost is $50,000. All revenues are received, and costs borne, at the end of each year. If the interest rate is 4 percent, determine the present value of the stream of:

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 2.2CE

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Question

An owner can lease her building for
$100,000 per year for three years. The
explicit cost of maintaining the building is
$35,000, and the implicit cost is $50,000.
All revenues are received, and costs
borne, at the end of each year. If the
interest rate is 4 percent, determine the
present value of the stream of:
Instructions: Do not round intermediate
calculations. Round your final calculation
to two decimal places.
a. Accounting profits.
$104000 X
b. Economic profits.
$19000 x

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