Suppose you are thinking of opening a cafe. You expect the cafe to cost $1,450,000 per year to operate, and you expect to make revenue of $1,600,000 per year. To make that you have to give up your highly paid finance job, where you currently earn $160,000 a year.

Calculate:

(a) The accounting profit you expect to make.

(b) The economic profit you expect to make.

Should you open the cafe?