summing up the reduced profit $/$ loss for $3$ years, we get the net present value of each project:Project $1$: NPV$1=$Project $2$: NPV$2=$Thus, at a discount d $=20\%$ the most effective is the Projec

the equipment must be used by the entity itself, and not leased.

Task$1$

The entrepreneur plans to open a candy store.

He decided to hire three confectioners with a salary of $$25,000$ a month and spent his entire start$-$up capital in the amount of $$40,000$ on the purchase of raw materials. In order to finance the purchase of equipment, he took out a bank loan for several years at $20\%$ per annum and bought equipment for the amount of $50,000$ USD, the service life of which is $5$ years, and the residual value is zero. The interest on deposits in the bank is $8$ points lower than the interest on loans. The entrepreneur uses his own premises for a candy store. He could lease this room and receive for it in the form of rent $2,500$ USD per month.

Previously, the Entrepreneur worked as a manager in a nearby restaurant with a salary of $$4,500$ a month. The total annual income of the candy store is expected to be $$180,000.$

Define:

the amount of annual accounting $($explicit$)$ and economic costs of entrepreneur;

the amount of its accounting and economic profit for the year;

What advice would you give to a candy store owner?

Solution

$\backslash$table$[[$Accounting $($explicit$)$ costs,Implicit costs$],[\backslash$table$[[$Employee salary:$],[25000]],\backslash$table$[[$Interest on deposits that could be$],[$received: ${180000}^{**}(20\%-0\mathrm{.}8\%)$