You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store. Suppose that the store has annual costs of $150,000 for labor, $70,000 for rent, and $30,000 for equipment. There is a one-half probability that revenues will be $230,000 and a one-half probability that revenues will be $400,000. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Enter a loss as a negative number. a. In the low-revenue situation, what will your accounting profit or loss be? $ -20,000 What will your accounting profit or loss be in the high-revenue situation? $ 180,000 | O b. On average, how much do you expect your revenue to be? $ 300,000| O Your accounting profit? $ 80,000| x Your economic profit? $ 20,000| * Will you quit your job and try your hand at being an entrepreneur? Yes

You are currently a worker earning $60,000 per year but are considering becoming an entrepreneur. You will not switch unless you earn an accounting profit that is on average at least as great as your current salary. You look into opening a small grocery store. Suppose that the store has annual costs of $150,000 for labor, $70,000 for rent, and $30,000 for equipment. There is a one-half probability that revenues will be $230,000 and a one-half probability that revenues will be $400,000. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Enter a loss as a negative number. a. In the low-revenue situation, what will your accounting profit or loss be? $ -20,000 What will your accounting profit or loss be in the high-revenue situation? $ 180,000 | O b. On average, how much do you expect your revenue to be? $ 300,000| O Your accounting profit? $ 80,000| x Your economic profit? $ 20,000| * Will you quit your job and try your hand at being an entrepreneur? Yes

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 6P

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