Economic profit is lower than his accounting profit

Assignment Help Business Management
Reference no: EM131386002

Bryan is trying to decide whether he should give up his job as a software programmer and invest in a start-up. Bryan earns an annual salary of $80,000 and has a saving of $50,000. The start-up would require an initial investment of $600,000. Bryan plans to take a loan from Trust Bank, a local commercial bank, which charges an interest rate of 5 percent on loans and provides an interest of 7 percent on savings deposits. Which of the following is true in this case?

  • Bryan should not invest in the start-up as his economic profit is lower than his accounting profit.

  • The 7 percent interest that Bryan could have earned on his savings will be included in the calculation of his economic profit.

  • The interest rate of 5 percent on loans is a part of the implicit cost of setting up the start-up and will be included in the calculation of his accounting profit.

  • Bryan should invest in the start-up as he has to pay a lower interest rate on loans than he receives on his savings deposits.

Reference no: EM131386002

Questions Cloud

Ross opportunity cost of producing a pound of butter : Suppose both Ross and Vivian produce butter and cheese. When Ross works for 10 hours a day, he produces 6 pounds of butter and 24 pounds of cheese. When Vivian works for the same hours, she produces 20 pounds of cheese and 40 pounds of butter. Ros..
Identify your inputs and outputs : Develop the minimized gate-level implementation using the K-map method.
What is the function of footage in the film : Movie: Citizen Kane In terms of realism, "Citizen Kane" heavily uses images that masquerade as documentary footage, What is the function of this footage in the film? Why is it there? What purpose does it serve? If any of you are aware of this film's..
Specify the function by filling out a complete truth table : The outputs indicate the highest index of the inputs that is driven high. For example, if 13 is 0, 12 is 1, 11 is 1, then 01, 00 would be 10 (i.e., 12 is the highest input set to 1).
Economic profit is lower than his accounting profit : The start-up would require an initial investment of $600,000. Bryan plans to take a loan from Trust Bank, a local commercial bank, which charges an interest rate of 5 percent on loans and provides an interest of 7 percent on savings deposits. Whic..
Calculate what his sales would have been : Calculate what his sales would have been if he had not made any errors.- Given that his expenses remain constant at 8% of his sales, calculate his net profit for the year 2015.
Absolute advantage in making guns : Suppose both Monica and Edith grow roses and make guns. If Monica devotes 10 hours to growing roses, she grows 16 roses, and if she devotes 10 hours to making guns, she produces 4 guns. If Edith divides her 10 hours equally, she produces 12 roses ..
Describe the function of this block : One block maps the month into a day offset into the year. Identify the inputs and outputs and their bit widths. Use any formal specification method you wish (e.g., truth tables, ROM contents, equations, hardware description language, etc.) to desc..
Real interest rates and political business cycle refers : Real interest rates. The political business cycle refers to.  Suppose aggregate demand fell. In order to stabilize the economy, the government might. Which of the following likely occurs when households and firms become more pessimistic?

Reviews

Write a Review

Business Management Questions & Answers

  How do you identify the strategic positions of the company

How do you identify the strategic positions of the company in terms of the knowledge assets so as to determine the areas where the knowledge management efforts need to be enhanced?

  Determine the expected completion time

Determine the expected completion time for each activity. Draw the network diagram for this project. Determine the expected completion time for this project, in days. Which activities are on the critical path?

  Companies can recruit qualified job applicants

Examine two ways that companies can recruit qualified job applicants. Determine which method may be most effective and predict how it could benefit the company when hiring new employees.

  What type of operations does your company conduct

What looks attractive initially about this country? What type of operations does your company conduct? Is your company a retailer, manufacturer, services oriented organization, or does it fall into some other category?

  Recent manipulation of the libor interest rate

The NPR podcast describes some banks' recent manipulation of the LIBOR interest rate. Confidence is crucial for our banking system to function effectively. How would uncertainty about banks' behavior affect your decision to invest in stocks and bo..

  Article on changes in spain wine industry

The article notes that Spanish and Italian wine were exported for the same price in 2000, but in 2014, "Italy was selling its wine for an average of $2.78... while Spain's sold for $1.30."

  Capture the complexity of motivating individuals

Prepare a mini-scenario that captures the complexity of motivating individuals in a diverse workforce,and use a real situation from workplace.

  Advantages of organizing the wbs

What are the advantages of organizing the WBS around deliverables rather than functions? What would be the advantages of organizing a WBS by function

  Does the company comply with the law

Does the company comply with the law?

  Important components in planning

Time and cost estimates are very important components in planning and executing'a0any project.  Estimating is the process of forecasting or approximating the time and cost of completing deliverables. Time is the the duration needed to complete the..

  Based on contingency theories of leadership

Based on contingency theories of leadership, what approach to leadership seems best for Whole Foods team leaders? Contrast Whole Foods to another organization in a similar industry. How do the differences in leadership styles impact the organizati..

  Develop implement and evaluate a sustainability process

BSB60215 Advanced Diploma of Business Assignment. Develop workplace policy and procedures for sustainability. Develop, implement and evaluate a sustainability process suitable to the workplace at Lonsdale Institute

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd