Question

Caroline is working for a marketing firm making $60,000 per year but considers starting her own marketing company. Caroline has determined that to launch the business, she needs to invest $100,000 of her own funds. The annual cost of running the business will include $75,000 for the rent of the office space, $190,000 for employee wages, and $6,000 for materials and utilities. Caroline plans to manage the business, which means that she will have to quit her current job. Suppose that the interest rate (or rate of return) on investments in the economy is 6%.

Caroline's total implicit cost per year is .

Answer 1

$66,000

Step-by-step explanation:

The computation of the total implicit cost per year is shown below:

= Given up salary + investment amount × interest rate on investment in the economy

= $60,000 + $100,000 × 6%

= $60,000 + $6,000

= $66,000

We simply added the given up salary and investment amount after considering the interest rate on investment so that the accurate amount could come