Question
Arthur is considering becoming chair of a company board that will pay $200,000 a year. Taking this position will require Arthur to give up another
Arthur is considering becoming chair of a company board that will pay $200,000 a year. Taking this position will require Arthur to give up another directorship that pays $75,000 a year. The job will involve travel anticipated to have an out- of-pocket cost of $20,000 a year. It will also require Arthur to buy $150,000 of shares in the company (which he must sell back to the company for $150,000 when he ceases to be chair of the board); currently Arthur has the money invested in the bank earning an interest rate of 10 per cent per year. What is Arthur's anticipated economic profit in the business's first year of operation?
Why is the correct answer $90000?
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