which is correct and why? thank you :) 17. Zach took $400,000 out of the bank an

Question

which is correct and why? thank you :)

17. Zach took $400,000 out of the bank and used it to start his new cookie business. The bank account pays 3 percent interest per year. During the first year of his business, Zach sold 6,000 boxes of cookies for $2.50 per box. Also, during the first year, the cookie business incurred costs that required outlays of money amounting to $9,000. Zach's accounting profit for the year was profit wa:s at any time. and his economic Assume that he can sell the rights to his business for $400,000 a) -$494,000, $3,000 b) -$494,000, -$6,000 c) $6,000, $3,000 d) $6,000, -$6,000

Explanation / Answer

Answer

Accounting profit=total revenue-explicit costs

=6000*2.5-9000=$6000

Economic profit=accounting profit-interest on capital invested

=6000-400000*0.03

=$-6000

option d

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