Question

You are a consultant to a large manufacturing corporation that is considering a project with the following net after-tax cash flows (in millions of dollars):

Answer 1

The firm's accounting profit is $50,000.

Step-by-step explanation:

The firm's accounting profit can be calculated by subtracting the total expenses from the sales revenue. In this case, the firm's total expenses are $600,000 (labor) + $150,000 (capital) + $200,000 (materials) = $950,000. Therefore, the accounting profit is $1,000,000 (sales revenue) - $950,000 (total expenses) = $50,000.