1. kiara is thinking of opening an artisanal cheese store. she forecasts revenues of $200,000 per year, and explicit financial costs of $120,000 per year. she could only pursue this dream if she quits her current job as a teacher, where she earns $40,000 per year. she would also need to invest $100,000 to outfit the store, and she would otherwise use that money to pay down her mortgage, which is at an interest rate of 8% per year. calculate accounting profit, implicit opportunity costs, and economic profit, and assess whether you would advise kiara to launch the new business

Accounting profit is a tool used to evaluate a company's performance and examine how it stacks up against rivals' financial positions. According to the Generally Accepted Accounting Principles, accounting profit is a company's net income, which is derived by deducting expenses from sales (GAAP).

The bottom line of a business is frequently referred to as accounting profit, sometimes known as net income. Accountants use this definition of profit to determine how much money a company has made after costs are deducted from the overall revenue of the organization.

The accounting profit = Revenue forecasted - explicit financial costs

The accounting profit = 200000 - 120000 = $ 80000

Implicit opportunity costs = earnings as a teacher + interest on the mortgage

Implicit opportunity costs = 40000 + 8% * 100000 = $48000

Economic Profit = Accounting Profit - Implicit opportunity costs = $32000

Hence, Kiara should launch the new business as there are economic profits to be made.

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