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3. Exercise 8.3 Mary Graham has worked as a real estate agent for Piedmont Properties for 15 years. Her annual income is approximately $100,000 per year. Mary is considering establishing her own real estate agency. She expects to generate revenues during the first year of $2 million. Salaries paid to her employees are expected to total $1.50 million. Operating expenses (e.g., rent, supplies, utility services) are expected to total $250,000. To begin the business, Mary must borrow $300,000 from her bank at an interest rate of 15%. Equipment will cost Mary $50,000. At the end of one year, the value of this equipment will be $30,000, even though the depreciation expense for tax purposes is only $5,000 during the first year. What is the (pre-tax) accounting profit for this venture? $185,000.00 $200,000.00 $85,000.00 $100,000 What is the (pre-tax) economic profit for this venture? $85,000.00 $200,000.00 $185,000.00 $100,000

3. Exercise 8.3 Mary Graham has worked as a real estate agent for Piedmont Properties for 15 years. Her annual income is approximately $100,000 per year. Mary is considering establishing her own real estate agency. She expects to generate revenues during the first year of $2 million. Salaries paid to her employees are expected to total $1.50 million. Operating expenses (e.g., rent, supplies, utility services) are expected to total $250,000. To begin the business, Mary must borrow $300,000 from her bank at an interest rate of 15%. Equipment will cost Mary $50,000. At the end of one year, the value of this equipment will be $30,000, even though the depreciation expense for tax purposes is only $5,000 during the first year. What is the (pre-tax) accounting profit for this venture? $185,000.00 $200,000.00 $85,000.00 $100,000 What is the (pre-tax) economic profit for this venture? $85,000.00 $200,000.00 $185,000.00 $100,000

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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3. Exercise 8.3 Mary Graham has worked as a real estate agent for Piedmont Properties for 15 years. Her annual income is approximately $100,000 per year. Mary is considering establishing her own real estate agency. She expects to generate revenues during the first year of $2 million. Salaries paid to her employees are expected to total $1.50 million. Operating expenses (e.g., rent, supplies, utility services) are expected to total $250,000. To begin the business, Mary must borrow $300,000 from her bank at an interest rate of 15%. Equipment will cost Mary $50,000. At the end of one year, the value of this equipment will be $30,000, even though the depreciation expense for tax purposes is only $5,000 during the first year. What is the (pre-tax) accounting profit for this venture? $185,000.00 $200,000.00 $85,000.00 $100,000 What is the (pre-tax) economic profit for this venture? $85,000.00 $200,000.00 $185,000.00 $100,000
Transcribed Image Text:3. Exercise 8.3 Mary Graham has worked as a real estate agent for Piedmont Properties for 15 years. Her annual income is approximately $100,000 per year. Mary is considering establishing her own real estate agency. She expects to generate revenues during the first year of $2 million. Salaries paid to her employees are expected to total $1.50 million. Operating expenses (e.g., rent, supplies, utility services) are expected to total $250,000. To begin the business, Mary must borrow $300,000 from her bank at an interest rate of 15%. Equipment will cost Mary $50,000. At the end of one year, the value of this equipment will be $30,000, even though the depreciation expense for tax purposes is only $5,000 during the first year. What is the (pre-tax) accounting profit for this venture? $185,000.00 $200,000.00 $85,000.00 $100,000 What is the (pre-tax) economic profit for this venture? $85,000.00 $200,000.00 $185,000.00 $100,000
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