Scenario: Accounting and Economic Profit
Rather than put the $100,000 that his grandmother left him in a mutual fund and earn 5% each year, Tommy Wang quit his job that paid $60,000 per year and used the $100,000 to start Wang's Wicker Furniture Store. He rented a showroom for $15,000 for the year, purchased $100,000 in capital equipment (an amount that depreciates $5,000 each year), purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. In his first year, his revenue was approximately $150,000.
Reference: Ref 16-01
(Scenario: Accounting and Economic Profit) What is the opportunity cost of Wang's $100,000 inheritance?