An owner can lease her building for $100,000 per year for the next three years. The explicit cost of maintaining the building is $35,000, and the implicit cost is $50,000. All revenues are received, and costs are borne, at the end of each year. Assume interest rate is 4%.
A. Explain what the implicit cost refers to in this case?
B. What is her accounting profit at the end of the first year?
C. What is her economic profit at the end of the first year?
D. What is the present value of the account profits in three years?
E. What is the present value of the economic profits in three years?