Asked by Camryn Morrow on Jul 16, 2024
Verified
Refer to Scenario 7.4. A yearly normal return for your company would be
A) $40,000.
B) $50,000.
C) $70,000.
D) $90,000.
Normal Return
The minimum profit necessary to keep a company in business, equating to the opportunity cost of capital.
Own Capital
The funds or assets personally invested by the owners into a business, distinct from borrowed capital.
- Comprehend the importance and calculation procedure of the normal rate of return in the field of economics for firms.
- Identify the differences between operating profit and economic profit.
Verified Answer
AC
Anthony CastaldiJul 20, 2024
Final Answer :
B
Explanation :
A yearly normal return is the opportunity cost of the capital invested in the business. In this scenario, it's the $50,000 a year return you could have earned elsewhere with your invested capital.
Learning Objectives
- Comprehend the importance and calculation procedure of the normal rate of return in the field of economics for firms.
- Identify the differences between operating profit and economic profit.