What was the explicit cost of the bookstore? Sofia owns and manages a bookstore. Following are her business' revenues and costs of the past year:
The bookstore's total revenue in the past year was $150,000.
The capital investments of this business were from the following sources:
$50,000 from Sofia's own funds, withdrawn from her savings account at ABC Bank.
$150,000 loan borrowed from ABC Bank.
Assuming that ABC bank's interest rates for saving accounts and for loans were the same: r = 10%.
Sofia is a skilled soccer player, and if she did not run her own business, she could work as a soccer coach and earn a salary of $50,000 a year.
In addition to the above items, the bookstore's all other expenditures (rents, maintenance, and materials) added up to $60,000 a year, which required immediate cash payments.