Question

A firm has $200 million in total revenue and explicit costs of $190 million. If its owners have invested $100 million in the company at an opportunity cost of 10 percent interest per year, the firm's accounting profit is:_________.

a. $400 million.
b. $100 million.
c. $80 million.
d. $10 million.

Answer 1

b. $100 million

Step-by-step explanation:

Data provided as per question below

Revenue = $200 million

Cost = $100 million

The computation of firm's accounting profit is shown below:-

Firm's accounting profit = Revenue - Cost

= $200 million - $100 million

= $100 million

Therefore, for computing the $100 firm accounting profit we simply applied the above formula.