Joe decided to quit his computer-programming job (where he was earning $48,000 per year) to start his own software business. For his office, Joe will use a two-story building that he bought 7 years ago for $250,000. The building is located in Hyde Park (South side of Chicago) in an area where a lot of recent construction has taken place, so the market price for the land has increased. You are given the following information about the costs of his firm: Joe will pay himself a wage of: Maintenance and insurance Revenue Land's salvage (resale) value Risk-free interest rate $18,000 per year $30,240 per year $96,000 per year $395,000 4.75% annually Assume for simplicity that all taxes are equal to zero. Calculate the economicannual profits of this firm (you can assume that investing the money at the risk-free rate is its best alternative use).

Joe decided to quit his computer-programming job (where he was earning $48,000 per year) to start his own software business. For his office, Joe will use a two-story building that he bought 7 years ago for $250,000. The building is located in Hyde Park (South side of Chicago) in an area where a lot of recent construction has taken place, so the market price for the land has increased. You are given the following information about the costs of his firm: Joe will pay himself a wage of: Maintenance and insurance Revenue Land's salvage (resale) value Risk-free interest rate $18,000 per year $30,240 per year $96,000 per year $395,000 4.75% annually Assume for simplicity that all taxes are equal to zero. Calculate the economicannual profits of this firm (you can assume that investing the money at the risk-free rate is its best alternative use).

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Firms In Competitive Markets

Section: Chapter Questions

Problem 4PA

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