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2. Exercise 8.2 Howard Bowen is a largescale cotton farmer. The land and machinery he owns has a current market value of $9 million. Bowen
2. Exercise 8.2 Howard Bowen is a largescale cotton farmer. The land and machinery he owns has a current market value of $9 million. Bowen owes his local bank $6 million. Last year Bowen sold $8 million worth of cotton. His variable operating costs were $6 million; accounting depreciation was $40,000, although the actual decline in value of Bowen's machinery was $50,000 last year. Bowen paid himself a salary of $50,000, which is not conSidered part of his variable operating costs. Interest on his bank loan was $400,000. If Bowen worked for another farmer or a local manufacturer, his annual income would be about $50,000. Bowen can invest any funds that would be derived if the farm were sold to earn 10% annually. (Ignore taxes.) What is Bowen's accounting profit? 0 $1,200,000.00 0 $1,550,000 0 $1,550,000 0 $1,190,000.00 What is Bowen's economic profit? 0 $1,190,000.00 0 $1,550,000 0 $1,200,000.00 0 $1,550,000
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