Economic profits-accounting profits

Reference no: EM13687657

What is the maximum amount you would pay for an asset that generates an income of $250,000 at the end of each of 5 years if the opportunity cost (interest rate) of using funds is 8 %?

A firm's current profits are $550,000. These profits are expected to grow indefinitely at a constant annual rate of 5 %. If the firm's opportunity cost of funds is 8 %, decide the value of the firm?

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 are borne, at the end of each year. If the interest rate is 4 %, compute the present value of the stream of flow.

(Hint: you need to compute the revenue and cost at the end of each three years and discounted all those streams back to the present value at present interest rate))

Economic profits

Accounting profits

Reference no: EM13687657

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