economic question

Question 2 193 is a famous singer and is planning for opening a coffee shop in Hung Horn. To nance his business, he needs a starting capital of $1,400,000. He withdraws $700,000 from his savings account, which he could earn a saving interest rate of 3% a year. Besides, he borrows another half of the capital amount from the bank at annual loan interest rate of 5%. Outbreak of Covid-lQ has pushed down the rent in Hong Kong. The monthly rent of this new shop is only $50,000 and the decoration cost is $200,000. The cost of equipment is $35,000, which is estimated to have resale value of $14,000 after a year of operation. Every month, the purchase costs of coffee beans and other raw materials are estimated at $60,000. The electricity and utility expenses are $4,000 per month. To operate his coffee shop, there are one shop manager and one shop assistant with total annual salary expense of $400,000. The annual promotional expense is $20,000. As he has more than 405,000 fans, the estimated annual revenue of his coffee shop is $2,000,000. {a} Dene explicit cost and annual implicit cost. Calculate 193's annual explicit costs and annual implicit costs of operating his coffee shop. List the relevant items in your calculation and show your workings. [12 marks} (bl With the concept of economic prot, based on the above information, would you recommend 193 to operate his coffee shop? Explain your answer with relevant data and workings. (4 marks} (c) The rational decision will be changed if there is any change of explicit or implicit cost. Supposing that the monthly rent changes, explain how the monthly rent changes so that 193 will change his decision obtained from (b). Support your answer with data. (4 marks}