The all-equity firm (it has no debt and so no interest expense) has shareholders who require 9% return on their invested capital. The firm’s assets total $1,200. Earnings before tax is $140 and the firm’s tax rate is 20%. What is the firm’s Economic profit?
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The all-equity firm (it has no debt and so no interest expense) has shareholders who require 9%
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- Desmond works as an accountant making $80,000 per year. He is considering leaving his job to open an artisanal cheese shop. He estimates that he will need to spend $20,000 per year on space, $10,000 per year on supplies and $40,000 per year on staff. The shop will earn will earn $120,000 per year in revenue. Assuming his estimates are accurate, what will Desmond's accounting profit be? Assuming his estimates are accurate, what will Desmond's economic profit be? Please enter your solution without commas, dollar signs, or cents.Your aunt is thinking about opening a hardware store. She estimates that it would cost $500,000 per year to rent the location and buy the stock. In addition, she would have to quit her $50,000 per year job as an accountant. If your aunt thought she could sell $510,000 worth of merchandise in a year, what is your aunt’s accounting profit?Consider a firm that uses capital and labor as inputs and sells 5,000 units of output per year at the going market price of $10. Also assume that total labor costs to the firm are $45,000 annually. Assume further that the total capital stock of the firm is currently worth $100,000, that the return available to investors with comparable risks is 10 percent annually, and that there is no depreciation. Calculate the economic profit and accounting profit of this firm? Explain your answer.?
- If most firms in an industry are earning a 7 percent rate of return on their assets, but your business is earning 9 percent, your rate of economic profit is minus 2 percent. 2 percent. 9 percent. 16 percent.You own a business and make $100,000/year. You pay yourself $50,000 and have input costs of $20,000. You could rent the land for $5,000. Starting salary at a competing firm is $100,000. What is your accounting profit? Economic profit? Should you stay in business? Would other firms enter into the market? What would change if you found a new niche market to sell your product and your sales jumped to $200,000 and your input costs went up to $30,000? What is your accounting profit? Economic profit? Should you stay in business? Would other firms enter into the market?Which of these must be present before you, as an economic advisor, would recommend a new company enter a competitive market? Question 33 options: An expectation to earn an accounting profit. Existing firms producing goods at the up-sloping portion of the average cost curve. An expectation to earn an economic profit. Existing firms producing goods at the lowest average cost.
- Show the effect of a 25% profit tax on the accounting profit of all firms in a competitive industry. Consider all time periods.3. Definition of economic costs Jacques lives in San Francisco and runs a business that sells guitars. In an average year, he receives $711,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $411,000; he also pays wages and utility bills totaling $279,000. He owns his showroom; if he chooses to rent it out, he will receive $1,000 in rent per year. Assume that the value of this showroom does not depreciate over the year. Also, if Jacques does not operate this guitar business, he can work as a financial advisor and receive an annual salary of $31,000 with no additional monetary costs. No other costs are incurred in running this guitar business. Identify each of Jacques's costs in the following table as either an implicit cost or an explicit cost of selling guitars. Implicit Cost Explicit Cost The wholesale cost for the guitars that Jacques pays the manufacturer The wages and utility bills that Jacques pays The rental income Jacques could…Describe two competitive companies with similar gross profit figures that ended up with dramatically different net operating income. Provide details of the two companies and include both qualitative and quantitative results to support your response.
- Question 5 Your uncle is thinking about opening a wine bar. He estimates that it would cost $400000 per year to rent the location and buy the stock. In addition he would have to quit his $120000 per year job as an accountant. Suppose your uncle thought he could sell $600000 worth of wine in a year. Which statement is true? His economic profit is $80000 which is less than he earns as an accountant so he should not open the wine bar Total cost of running the wine bar is $400000 and he should open the store since his economic profits would be $180000. Total cost of running the wine bar is $520000 and he should open the bar since his economic profits will be positive. His accounting profits are $80000 which is still enough to make it worth opening the wine barAssume that although Marrow firm is presently making accounting profit it isexperiencing negative economic profit in its current venture. The owner of the firm does not understand what this means and asks you to explain to him.Global Corp. sells its output at the market price of $7 per unit. Each plant has the costs shown below: Units of Output Total Cost ($) 0 6 1 2 3 4 5 6 8 12 18 26 36 48 7 Q1. What is the breakeven quantity? Enter O if total profit is always negative. Q2. What is the breakeven revenue? Enter O if total profit is always negative. Q3. What is the profit at each plant when operating at its optimal output level? Q4. How many units of output should each plant produce? 62