a. Accounting ProfitsRevenues$5,000,000 Less: variable operating costs$4,500,000 less depreciation$40,000 less wages50,000Operating income410,000interest expense400,000accounting income before taxes10,000b. Economic ProfitsRevenues$5,000,000 Less var operating costs4,500,000opp value of potential income30,000economic depreciation60,000economic profit before costs410,000Less int expense400,000opp cost of equity investment100,000profit-90,000
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Generally Accepted Accounting Principles, Economic Profits Revenues