Scenario 9.1 Jane Left Her Job at Siemens and Started Her Own

Scenario 9.1
Jane left her job at Siemens and started her own boutique. She used to earn $50,000 annually at Siemens. She took a loan of $10,000 and used $20,000 from her personal savings to begin her venture. She agreed to repay the loan with 10% interest. Her business is bringing in $80,000 annually. She has rent and labor expenses of $15,000. Also assume that Jane could have used her own money i.e. $20,000 to buy stocks in Intel which would have returned 5% to her last year.
-Nancy owns and operates a drug store that generates total revenues worth $30 million in a particular year. Her accounting costs for the year are $25 million. She could have earned $3 million in this year, if she had worked as a consultant for a pharmaceutical firm. Further, she could have earned 5 percent interest on $40 million of her own money that she invests in the business this year. Nancy's accounting profit in this year is _____ and her economic profit is _____.

A) $5 million; zero
B) $5 million; $3 million
C) $5 million; $8 million
D) zero; $3 million
E) $3 million; $43 million

Correct Answer:

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