Question #72442
A firm owned by an investor who invested $500, 000 earns a profit of $150, 000 a year. The best investment alternative for the investor is a portfolio of stocks and bonds earning a return of 12%. What is the economic profit?
Expert's answer
Economic profit = Revenue - Opportunity cost
Opportunity cost = ($500 000 * 12%)/100% = $60 000
Economic profit = $150 000 - $60 000 = $90 000
Opportunity cost = ($500 000 * 12%)/100% = $60 000
Economic profit = $150 000 - $60 000 = $90 000
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#339914 on Dec 2023
#339914 on Dec 2023
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