Last year Chloe quit her $60,000 per year job as a web-page designer for a leading computer software company to buy a small hotel on Saranac Lake. The purchase price of the hotel was $300,000, which she financed by selling a tax-free municipal bond that earned 5.5% per year. Chloe’s total operating expenses and revenues were $100,000 and $200,000, respectively. A. Calculate Chloe’s accounting profit. B. Calculate Chloe’s economic profit.
Last year Chloe quit her $60,000 per year job as a web-page designer for a leading computer software company to buy a small hotel on Saranac Lake. The purchase price of the hotel was $300,000, which she financed by selling a tax-free municipal bond that earned 5.5% per year. Chloe’s total operating expenses and revenues were $100,000 and $200,000, respectively. A. Calculate Chloe’s accounting profit. B. Calculate Chloe’s economic profit.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 2E
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Last year Chloe quit her $60,000 per year job as a web-page designer for a leading computer software company to buy a small hotel on Saranac Lake. The purchase price of the hotel was $300,000, which she financed by selling a tax-free municipal bond that earned 5.5% per year. Chloe’s total operating expenses and revenues were $100,000 and $200,000, respectively.
A. Calculate Chloe’s accounting profit.
B. Calculate Chloe’s economic profit.
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