Calculate the economic profit generated by a business with a capital cost of 10% for $2 billion of capital invested.Its net marketing contribution is $450 million and its other expenses,including interests and taxes,amount to $200 million.
A)$250 million
B)$200 million
C)$50 million
D)$100 million
E)$150 million

Question

Quizplus · Accepted Answer

Economic profit is calculated as net marketing contribution minus other expenses and the cost of capital. Here, it is $450 million - $200 million - ($2 billion * 10%) = $50 million.

Calculate the Economic Profit Generated by a Business with a Capital