Solution-Identify the explicit versus implicit costs

Identify the explicit versus implicit costs

Assignment Help Managerial Economics

Reference no: EM13976743

You have worked as a real estate agent for 10 years and are earning about $100,000 per year with your current agency. You prepared the following information to use in evaluating the financial feasibility of starting your own agency:
Revenues generated during the first year of operations: $1.5 millionSalaries and other labor costs paid to employees during the first year of operations: $1 million
Operating expenses (e.g., rent, communications: $150,000Equipment purchases: $100,000 with a 5 year straight line depreciationYou need $100,000 in equity, which you can withdraw from your bank account that is currently paying 2% per year in interest, and a $400,000 loan with a 15% interest rate.

a. What is your expected pretax accounting profit from your proposed agency?

b. What is your expected pretax economic profit from your proposed agency?

c. Identify the explicit versus implicit costs.

d. Complete the following table using your understanding of the relationship among the various costs.

Reference no: EM13976743

Questions Cloud

Calculate magnitude of the difference between the frequency : Calculate the magnitude of the difference between the frequency of the emitted wave and the wave that returns to the police car after reflecting from the speeder's car.

What will be its price one year hence : An 8.6%, ten-year bond yields 6.6%. If the yield remains unchanged, what will be its price one year hence? Assume annual coupon payments.

Philosophical move toward smaller government : Federal employment, as a percentage of all employment, began to decline in the 1970s. To know whether this signaled a philosophical move toward smaller government, what additional information would you want?

Forecast using percentage of sales model expects sales : A forecast using a percentage of sales model expects sales to increase by 4.8% annually over the next 4 years. If costs are proportional to sales at 80%, and last year's sales were $2,200, the net income in the fourth year will be:

Identify the explicit versus implicit costs : What is your expected pretax economic profit from your proposed agency? Complete the following table using your understanding of the relationship among the various costs.

Bond transactions on your statement of cash flows : For this discussion, assume the role of a business owner who has to make a decision to raise additional capital. What considerations would you evaluate relative to issuing bonds as compared with conventional financing methods? How would you reflect t..

Financial ratios has the highest weight : Which of the following financial ratios has the highest weight in Altman's Z-score estimation? If a firm decided to speed up its collection from its customers by reducing the receivables period and kept the inventory period and payable period the sam..

What will be the effect on retained earnings if a firm : What will be the effect on retained earnings if a firm with 5,600 shares outstanding earns $10 per share and has a 30% plowback ratio? It will increase by: A firm sells its $1,000,000 receivables to a factor for $964,000. Average collection period is..

What arbitrage opportunities are open to the bank : A bank can borrow or lend at LIBOR. Suppose that the six-month rate is 5% and the nine-month rate is 6%. The rate that can be locked in for the period between six months and nine months using an FRA is 7%. What arbitrage opportunities are open to the..

User Account

All Pages

Identify the explicit versus implicit costs

Reference no: EM13976743

Reference no: EM13976743

Questions Cloud

Reviews

Write a Review

Managerial Economics Questions & Answers

Linear programming problem

Demand, supply and the market equilibrium

Supply and demand in professional sports

Explain whether the firm will make economic profit

Determine the official measure of the deficit

Coordination of the activities of a business

What is the profit maximizing number of gizmo widgets

Determine autocorrelation function of a rectangular pulse

Managerial economics assignment

Prepare a marginal cost analysed income statement for 2014

Prepare a marginal cost analysed income statement for 2014

Solve managerial economics questions

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT