Discussion Question 9: How is the concept of a normal return on
investment related to the distinction between business and economic
profit?
Problem 6: Determine which of the two investment projects of
Problem 5 the manager should choose if the discount rate of the
firm is 20 percent.
Problem 9: A woman managing a photocopying establishment for
$25,000 per year decides to open her own duplicating place. Her
revenue during the first year of operations is $120,000 and her
expenses are as follows:
Salaries to hired help
45,000
Supplies
15,000
Rent
10,000
Utilities
1,000
Interest on bank loan
10,000
Calculate (a) Explicit Costs, (b) Implicit Costs, (c) Business Profit,
(d) Economic Profit, and (e) Normal Return on Investment.
Spreadsheet Problem: Using the data below, where column A
represents student numbers, column B the finishing time for a 1
mile race for students, and column C the age of the students.