What is the accounting profit that fred would get in venture

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Your friend Fred is considering opening a ski shop in Colorado. He knows you are doing your MBA at Midland and is asking for some free consultation on the profits that he would make on his venture. Assume Fred will incur the following costs: building rent = $100,000/year, inventory = $250,000/year, energy = $50,000/year and labor (one clerk) = $10,000/year. In addition, Fred's current income as a computer programmer is $40,000 per year. Assuming Fred would earn $460,000/year in revenues from his ski shop. What is the accounting profit that Fred would get in his venture? What is the economic profit that Fred would get in his venture? Would you recommend Fred go ahead with his venture? Why?

Reference no: EM13149374

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