Danielle_Cost_Profit_Example

Danielle_Cost_Profit_Example - quitting her current job...

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Suppose Danielle is considering opening her own beauty salon. She anticipates the following costs per year: Furniture: $40,000 explicit Equipment: $30,000 explicit Rent: $18,000 explicit Coloring products: $12,000 explicit Styling products: $8,000 explicit Danielle is withdrawing $70,000 from her savings account that pays 2 percent interest per year to purchase the furniture and equipment and is
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Unformatted text preview: quitting her current job that pays $28,000. She expects that the total revenues from the new business in the first year will be $125,000. Calculate the following: Explicit costs: $108,000 Implicit costs: interest not being earned 2% of $70,000 = $1,400 + $28,000= $29,400 Accounting profit: $125,000 - $108,000 = + $17,000 Economic profit: -$12,400...
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