ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Please help me fix c. Thanks!

c. Suppose the government imposes a 25 percent tax on accounting profits. This tax is levied only if a firm is earning positive
accounting profits. What will your after-tax accounting profit be in the low-revenue case?
$ -20,000
In the high-revenue case?
$ 112,500 *
What will your average after-tax accounting profit be?
$ 48,750
What will be your average after-tax economic profit?
$ 3,750 8
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Transcribed Image Text:c. Suppose the government imposes a 25 percent tax on accounting profits. This tax is levied only if a firm is earning positive accounting profits. What will your after-tax accounting profit be in the low-revenue case? $ -20,000 In the high-revenue case? $ 112,500 * What will your average after-tax accounting profit be? $ 48,750 What will be your average after-tax economic profit? $ 3,750 8
You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you
earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store.
Suppose that the store has annual costs of $150,000 for labor, $70,000 for rent, and $30,000 for equipment. There is a one-half
probability that revenues will be $230,000 and a one-half probability that revenues willI be $400,000.
Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in
front of those numbers. Enter a loss as a negative number.
a. In the low-revenue situation, what will your accounting profit or loss be?
$ -20,000
What will your accounting profit or loss be in the high-revenue situation?
$ 150,000
b. On average, how much do you expect your revenue to be?
$ 315,000
Your accounting profit?
$ 65,000
Your economic profit?
$ 5,000
Will you quit your job and try your hand at being an entrepreneur?
Yes
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Transcribed Image Text:You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store. Suppose that the store has annual costs of $150,000 for labor, $70,000 for rent, and $30,000 for equipment. There is a one-half probability that revenues will be $230,000 and a one-half probability that revenues willI be $400,000. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Enter a loss as a negative number. a. In the low-revenue situation, what will your accounting profit or loss be? $ -20,000 What will your accounting profit or loss be in the high-revenue situation? $ 150,000 b. On average, how much do you expect your revenue to be? $ 315,000 Your accounting profit? $ 65,000 Your economic profit? $ 5,000 Will you quit your job and try your hand at being an entrepreneur? Yes
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