Exam 21: Rents, Profits, and the Financial Environment of Business

Amber has opened a coffee shop for many years on a piece of land that she has also owned. She has also made accounting profits from the coffee shop. This year, rents in the area rose considerably, and Amber responded by deciding to sell the land and the coffee shop to an apartment builder. How can you explain Amber's decision to sell her business?

If the rate of inflation is zero, prices are expected to remain stable, and the nominal rate of interest is 5 percent, then the

Suppose Jon Stewart of the "Daily Show" makes an annual income of $1,000,000. If he quit his television job and went into producing he could make $400,000 per year. Jon Stewart's annual economic rent to labor is

A legal claim to a part of a corporation's future profits is called

Which of the following is not a principal method of financing today?

In a partnership, debts accumulated by one partner

Economic profit can be calculated as

Proprietorships are

Suppose that you open your own business and earn an accounting profit of $30,000 per year. When you started your business, you left a job that paid you a $25,000 salary annually. Also, suppose that you invested $70,000 of your own funds to start up your business. If the normal rate of return on capital is 5 percent, your economic profit is

When a firm uses profits to purchase new capital equipment, it is engaging in

If your business earns $10,000 in revenues, has explicit costs of $7,000, and implicit costs of $5,000, your accounting profit is

Given a discount rate of 10 percent, the present value of receiving $10,000 two years in the future is

Which legal claim comes with the most preferential treatment in the payment of dividends?

Interest can be defined as

Interest rates are higher the

The part of corporate profits that is paid to the shareholders of a corporation is

The more profits are reinvested into the firm, the

What is the main purpose of an interest payment? What major factors affect interest rates?

If profits are reinvested in the corporation, then

Economic profits are equal to