Homework Answers
Q8
Answer
Accounting profit =revenue -explicit costs
=120000-60000
=60000
Economic profit =accounting profit -implicit costs
Implicit costs =salary +interest on the saving
=40000+interest on the saving
Economic profit is zero if the interest rate is 5%
0=60000-40000+interest amount
Interest amount =20000
Saving =interest amount /interest rate
=20000/0.05
=400000
Option 1
$400000
=================
Q9
Answer
Option 2
The economic profit =20000-interest amount
As the interest rate decreases the economic profit increases and vice versa.
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I took 120,000-60,000 = 60,000 Acct Profit 40,000 + .05X = 60,000 where X = Savings Solved for X, I got 400,000 Is this...
I took 120,000-60,000 = 60,000 Acct Profit
40,000 + .05X = 60,000 where X = Savings
Solved for X, I got 400,000
Is this right? If not, please show me how to do it correctly
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I took 120,000-60,000 = 60,000 Acct Profit
40,000 + .05X = 60,000 where X = Savings
Solved for X, I got 400,000
Is this right? If not, please show me how to do it correctly
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