An individual\'s annual income is $100,000. The person is considering opening th

Question

An individual's annual income is $100,000. The person is considering opening their own business. Expected revenues for the business, if they open it, is 2 million the first year. Salaries for employees are expected to be 1.5 million. Operating expenses (rent, supplies, etc. ) are expected to be $250,000. To start the business the individual must borrow $500,000 from the bank at an interest rate of 15%. Equipment will cost $50,000. At the end of the year, the value of the equipment will be $30,000, even though the depreciation expense for tax purposes is only $5,000 during the first year. The pre-tax accounting profit will be

Explanation / Answer

Pre-Tax Accounting Profit = Gross Revenue - Operating Expenses

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