Joe decided to quit his computer-programming job (where he was earning $48,000 per year) to start his own softwarebusiness. For his office, Joe will use a two-story building that he bought 7 years ago for $250,000. The building is locatedin Hyde Park (South side of Chicago) in an area where a lot of recent construction has taken place, so the market price forthe land has increased. You are given the following information about the costs of his firm:Joe will pay himself a wageof:Maintenance and insuranceRevenueLand's salvage (resale) valueRisk-free interest rate$18,000per year$30,240per year$96,000per year$395,0004.75%annuallyAssume for simplicity that all taxes are equal to zero. Calculate the economicannual profits of this firm (you can assumethat investing the money at the risk-free rate is its best alternative use).

The objective of this question is to calculate the economic annual profits of Joe's firm. Economic…

Answered: Joe decided to quit his…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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