Although Goldman Sachs paid Heather $90,000.00 per year, she was not satisfied with her job. She had loved going white-water rafting and skiing with her family in Utah since she was a little girl. So last year, she decided to open her own business: Family Adventures. During the summer, she takes families on different white-water trips, and in the winter, she leads clients on skiing trips. To start her business, Heather borrowed $100,000 from a bank and used $120,000.00 of her savings. Her savings earned 10% interest. At the end of the year, she wanted to know whether her new business venture was worthwhile. The table below lists her total revenue and itemized costs for Family Adventures.
Item | Annual Dollar Value |
Total revenue | $220,000.00 |
Employee wages | $100,000.00 |
Rent on her business office | $25,000.00 |
Payments on bank loan | $10,000.00 |
Utility and gas expenses | $5,000.00 |
3rd attempt
Part 1 (1 point)
See Hint
Family Adventures' accounting profit was $ .
Part 2 (1 point)
See Hint
Family Adventures' economic profit was $ . (If the economic profit is less than zero, be sure to include the - sign.)
(Part 1)
Accounting profit = Revenue - Total accounting costs
= 220,000 - 100,000 - 25,000 - 10,000 - 5,000
= 80,000
(Part 2)
Economic profit = Accounting profit - Implicit costs = Accounting profit - Salary given up - Interest income given up
= 80,000 - 90,000 - (120,000 x 10%)
= - 10,000 - 12,000
= - 22,000
Although Goldman Sachs paid Heather $90,000.00 per year, she was not satisfied with her job. She...
Although Goldman Sachs paid Heather $120,000.00 per year, she was not satisfied with her job. She had loved going white-water rafting and skiing with her family in Utah since she was a little girl. So last year, she decided to open her own business: Family Adventures. During the summer, she takes families on different white-water trips, and in the winter, she leads clients on skiing trips. To start her business, Heather borrowed $100,000 from a bank and used $90,000.00 of...
Although Goldman Sachs paid Heather $110,000.00 per year, she was not satisfied with her job. She had loved going white-water rafting and skiing with her family in Utah since she was a little girl. So last year, she decided to open her own business: Family Adventures. During the summer, she takes families on different white-water trips, and in the winter, she leads clients on skiing trips. To start her business, Heather borrowed $100,000 from a bank and used $100,000.00 of...
USLUIT (2 points) See page 246 Although Goldman Sachs paid Heather $100,000.00 per year, she was not satisfied with her job. She had loved going white-water rafting and skiing with her family in Utah since she was a little girl. So last year, she decided to open her own business: Family Adventures. During the summer, she takes families on different white water trips, and in the winter, she leads clients on skiing trips. To start her business, Heather borrowed $100,000...
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