EBK ECONOMICS
13th Edition
ISBN: 8220106799642
Author: PARKIN
Publisher: PEARSON
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Chapter 24, Problem 2SPA
To determine
Identify the value of M’s capital at the end of 2018.
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Question 1
Currently, Jason is the shop manager of a famous cake shop and his annual salary is $390,000. Wealth
accumulation is always his goal, so after having been working for 5 years in the same cake shop,
Jason plans to start his own business - a pie-and-tart shop. The following is his draft business plan:
.
To finance his new business, he needs a start-up capital of $400,000. He plans to withdraw fund
from his investment account that earns interest of 5% steadily every year.
The rental contract of his new shop is one year and the monthly rental payment is $25,000.
⚫ His best friends promise to decorate the shop without charge as a gift to celebrate his new career
development; Jason will save $120,000 for decoration.
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resale value of these items is $80,000 after a year of operation.
Apart from these, he would recruit two full-time shop assistants with monthly salary of $11,000 per…
1. The following table presents some data from I.M. Farmer's income statement. Use the
information to compute values for each of the items listed below.
+
Total revenue
Net farm income
Average net worth
Average asset value
Interest expense
a. Rate of Rate of return on assets
b. Rate of return on equity_
C. Return to family labor_
$120,000 Total operating expenses
$36,000
Opportunity cost of labor
$180,000 opportunity cost of management
$360,000 Opportunity cost of capital
$12,000
d. Return to management_
%
%
e. Assess the profitability of I.M. Farmer's business, and explain your answer.
$72,000
$20,000
$5,000
12%
12. Vanessa is working for a marketing firm making $60,000 per year but considers starting her own marketing
company. Vanessa has determined that to launch the business, she needs to invest $100,000 of her own funds.
She currently makes 6% return on her money while it is in the bank, so if she invests in this business, she will be
giving up $6000 ($100,000x.06) in interest each year. The annual cost of running the business will include
$70,000 for the rent of the office space, $210,000 for employee wages, and $5,000 for materials and utilities.
Vanessa plans to manage the business, which means that she will have to quit her current job.
a. Which costs above are considered explicit costs? Which costs are considered implicit costs?
b. What is Vanessa's explicit cost per year?
C. What is Vanessa's implicit cost per year?
Chapter 24 Solutions
EBK ECONOMICS
Ch. 24.1 - Prob. 1RQCh. 24.1 - Prob. 2RQCh. 24.1 - Prob. 3RQCh. 24.1 - Prob. 4RQCh. 24.2 - Prob. 1RQCh. 24.2 - Prob. 2RQCh. 24.2 - Prob. 3RQCh. 24.2 - Prob. 4RQCh. 24.2 - Prob. 5RQCh. 24.3 - Prob. 1RQ
Ch. 24.3 - Prob. 2RQCh. 24.3 - Prob. 3RQCh. 24.3 - Prob. 4RQCh. 24.3 - Prob. 5RQCh. 24.3 - Prob. 6RQCh. 24.4 - Prob. 1RQCh. 24.4 - Prob. 2RQCh. 24.4 - Prob. 3RQCh. 24 - Prob. 1SPACh. 24 - Prob. 2SPACh. 24 - Prob. 3SPACh. 24 - Prob. 4SPACh. 24 - Prob. 5SPACh. 24 - Prob. 6SPACh. 24 - Prob. 7SPACh. 24 - Prob. 8SPACh. 24 - Prob. 9SPACh. 24 - Prob. 10SPACh. 24 - Prob. 11SPACh. 24 - Prob. 12SPACh. 24 - Prob. 13APACh. 24 - Prob. 14APACh. 24 - Prob. 15APACh. 24 - Prob. 16APACh. 24 - Prob. 17APACh. 24 - Prob. 18APACh. 24 - Prob. 19APACh. 24 - Prob. 20APACh. 24 - Prob. 21APACh. 24 - Prob. 22APACh. 24 - Prob. 23APACh. 24 - Prob. 24APACh. 24 - Prob. 25APACh. 24 - Prob. 26APACh. 24 - Prob. 27APACh. 24 - Prob. 28APACh. 24 - Prob. 29APACh. 24 - Prob. 30APA
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