Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 22

An owner can lease her building for $120,000 per year for three years. The explicit cost of maintaining the building is $40,000, and the implicit cost is $55,000. All revenues are received, and costs borne, at the end of each year. If the interest rate is 5 percent, determine the present value of the stream of
a. Accounting profits.
b. Economic profits.