Question 2 Winnie is an accountant working in a famous accounting firm in Hong Kong with a monthly salary of $40,000. She is also good at cooking and making dessert. Hence, she is planning to open her dream cafe. She estimated the annual revenue of the cafe could be $1,150,000. To finance her business, Winnie needs a capital of $250,000 so that she plans to withdraw her time deposit with an annual interest rate of 5%. She would operate the cafe in her own shop, which could provide her a monthly rental income of $12,000. Apart from these, the equipment cost is $30,000, which could be sold at $12,800 one year later. Winnie will recruit a shop assistant with a monthly salary of $20,000. She estimates that the food cost would be $14,500 per month. (a) Based on the above data, calculate the annual explicit costs, annual implicit costs and economic profit of Winnie's cafe in her first year of operations. List all items and show all workings in your calculation. Would you recommend Winnie to operate the cafe? Why? (10 marks) (b) John, Winne's supervisor, wants to retain Winnie by increasing her salary. However, after the salary increment, Winnie decided to resign and open her dream cafe. Explain how could this happen. (5 marks) - END OF PAPER - Page 3 of 3