Mary Graham has worked as a real estate agent for Piedmont Properties for 15 years....
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Accounting
Mary Graham has worked as a real estate agent for Piedmont Properties for 15 years. Her annual income is approximately $200,000 per year. Mary is considering establishing her own real estate agency. She expects to generate revenues during the first year of $4 million. Salaries paid to her employees are expected to total $3.00 million. Operating expenses (e.g., rent, supplies, utility services) are expected to total $500,000. To begin the business, Mary must borrow $600,000 from her bank at an interest rate of 15%. Equipment will cost Mary $100,000. At the end of one year, the value of this equipment will be $60,000, even though the depreciation expense for tax purposes is only $10,000 during the first year.
What is the (pre-tax) accounting profit for this venture?
$200,000
$170,000.00
$400,000.00
$370,000.00
What is the (pre-tax) economic profit for this venture?
$400,000.00
$200,000
$370,000.00
$170,000.00
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