--From the end-of-chapter discussion questions (DQ) and problems (P)
--6.7 points each for a total of 80 points
Salvatore’s Chapter 1:
a. Discussion Questions: 9
Normal return is the minium profit that is required to cover the costs of inputs and all of expenses associated with it. Economic profit is a forgone profit and not and economic profit which is the biggest difference between the two types of profits.
The difference between economic profit and business profit is that in economic profit, profit or loss is calculated by subtracting opportunity cost of the inputs from the revenue of sales. Business profit is the difference between the total revenue and total costs incurred to earn that revenue.
Problems: 6, 9, and spreadsheet problem (p.37)
Determine which of the two investment projects of problem 5 the manager should choose if the discount rate of the firm is 20 percent.
Answer: The first project would be undertaken as it is higher Net Present Value
a) Explicit cost = 45,000 +15,000+10,000+1,000+ 10,000 = $81,000
b) Implicit costs = Opportunity cost – which is her salary forgone = $25,000
c)The business profit:120,000 -81,000 = $39,000
d)The economic profit:120,000 – (81,000 + 25,000)= $14,000
e) The norml return on investment in this business: 14,000 /$81,000 = 17.28% (This figure is calculated assuming that the investment is $81,000, since the question does not specifically state the amount of the investment.
Spreadsheet on pg 37 – a) Line Graph of all the finishing times
Mean: 9.22 Median 9.7 Mode: 9.6 Sample Variance: 2.54
Sample standard deviation: 1.5943 Coefficient of variation: 0.1729
Froeb and McCann’s Chapter 3:
a. Individual problems:
Housing market rises as fast as stocks and also that the tunure is 10 years and also that your investment s...