You use $50,000 of your own money to start an espresso stand. During the first year you earn a10% return on that investment. If the current interest rate on savings is 8%, you earn an economicprofit of$4,000.O $1,000.0-$4,000.$5,000.

Accounting profit:Investment: $50,000Return: 10%Accounting profit: 10% of $50,000 = $5,000…

Answered: You use $50,000 of your own money to…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 7SCQ: If you receive 500 in simple interest on a loan that you made for 10,000 for five years, what was...

See similar textbooks

Similar questions

What refers to the interest rate at which the present worth of net cash flow of an investment equals to zero? O Return of investment Yield O Economic return Rate of return O Annual worth
Brian lives in San Diego and runs a business that sells guitars. In an average year, he receives $733,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $433,000; he also pays wages and utility bills totaling $257,000. He ovwns his showroom; if he chooses to rent it out, he vill receive $13,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Brian does not operate this guitar business, he can vork as a paralegal, receive an annual salary of $23,000 vith no additional monetary costs, and rent out his showroom at the $13,000 per year rate. No other costs are incurred in running this guitar business. Identify each of Brian's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The vholesale cost for the guitars that Brian pays the manufacturer The salary Brian could earn if he worked as a paralegal The vages and utility…
The payback period with interest is the length of time required to recover the first cost of an investment from the cash flow produced by the investment for a given interest rate i Select one: O True False
J Assume that at the beginning of the year, you purchase an investment for $14,200 that pays $95 annual income. Also assume the investment's value has increased to $15,800 by the end of the year. a. What is the rate of return for this investment? Note: Input the amount as a positive value. Enter your answer as a percent rounded to 2 decimal places. Rate of return b. Is the rate of return a positive or a negative number? O Positive O Negative
Only typed answer
How long it will take for the cost of the investment to be recovered from its benefits is referred to as profitability. O True O Falce
2
Jacob manages a cloth manufacturing firm. He is deciding whether or not to invest In new machinery, The machinery costs $45,000 today and is expected to Increase cash lows in the first year by $25,000 and in the second year by $30,000. The firm's accrued fixed costs are $2800. If the interest rate (cost of capital) is 15% then whal is the net present value of the investment? 26.09 O 1840.09 2826.09 -576.56
You own a tract of trees and are deciding whether to harvest them now or next year. If you harvest them now, you can invest the proceeds and get a return of 5% on your investment. What should you do? Let the trees grow as long as their dollar worth increases by less than 5% a. b. C. d. Cut down the trees, and sell them Let the trees grow Let the trees grow as long as their dollar worth increases by more than 5%
If you want to withdraw $5000 in each year for the next 10 years when the interest rate is 40%, what is the approximate amount you need to invest now? O a. $11000 O b. $13000 O . $8500 O d. $16000
What is the future value of $2000 per year for 5 years invested at 10%? * O a. $3,221. O b. $12,210. O c. $10,000. O d. $13,480.
During a year of operation, a firm collects $50,000 in sales revenue and spends $10,000 on salaries of workers, $1,520 on electricity and utilities, $6,000 on raw materials. The firm owner had to leave his job which was paying $30,000 of annual salary. The firm owner also used $5,000 of his personal savings, which was earning a guaranteed 5 percent annual rate of return. calculate The firm earns accounting profit, The firm's economic profit.

SEE MORE QUESTIONS

Recommended textbooks for you

Principles of Economics 2e

Economics

ISBN:

9781947172364

Author:

Steven A. Greenlaw; David Shapiro

Publisher:

OpenStax

Exploring Economics

Economics

ISBN:

9781544336329

Author:

Robert L. Sexton

Publisher:

SAGE Publications, Inc

ECON MICRO

Economics

ISBN:

9781337000536

Author:

William A. McEachern

Publisher:

Cengage Learning

Principles of Economics 2e

Economics

ISBN:

9781947172364

Author:

Steven A. Greenlaw; David Shapiro

Publisher:

OpenStax

Exploring Economics

Economics

ISBN:

9781544336329

Author:

Robert L. Sexton

Publisher:

SAGE Publications, Inc

ECON MICRO

Economics

ISBN:

9781337000536

Author:

William A. McEachern

Publisher:

Cengage Learning

Microeconomic Theory

Economics

ISBN:

9781337517942

Author:

NICHOLSON

Publisher:

Cengage

SEE MORE TEXTBOOKS

You use $50,000 of your own money to start an espresso stand. During the first year you earn a 10% return on that investment. If the current interest rate on savings is 8%, you earn an economic profit of $4,000. O $1,000. 0-$4,000. $5,000.