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Eric is considering opening a gym. The annual costs are anticipated to be the following: Additionally, Table 1: Office furniture $5,000 Equipment $30,000 Rent $25,000
Eric is considering opening a gym. The annual costs are anticipated to be the following: Additionally, Table 1: Office furniture $5,000 Equipment $30,000 Rent $25,000 Insurance $2,500 Eric is withdrawing $35,000 from his savings account to purchase the furniture and equipment. This account pays 2% interest per year. Eric will also quit his current job which pays $40,000 per year. Revenues from the new business are expected to be $100,000 in the first year. a. What are the economic and accounting profits John experiences? b. If these conditions do not change, should Eric open the gym? Explain. If not, what should the revenues amount to in order to justify starting the new business
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