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damaskus
25 days ago
5

​greg, a​ landscaper, is planning on opening his own landscaping company. he currently earns​ $40,000 per year working for his u

ncle but he will need to quit that job. he plans to use​ $10,000 in savings to pay for the equipment he​ needs, though even after use he could sell the equipment for what he​ paid, $10,000. the current interest rate on savings is 5 percent. what is the total economic cost incurred by greg in running his own​ business?
Business
1 answer:
marusya05 [3K]25 days ago
5 0

Answer:

The annual total economic cost amounts to $40,500

Explanation:

This figure is derived from adding:

* The lost opportunity cost from Greg leaving his current job, equating to his salary of $40,000.

* The opportunity cost from forfeiting the interest from $10,000 in savings, now designated for equipment purchase, calculated as: 10,000 * the current savings interest rate = 10,000 * 5% = $500 (the actual equipment cost is not included since he could resell it for the same amount he spent).

=> Therefore, the total annual economic cost is $40,000 + $500 = $40,500.

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