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Suppose Lando Calrissian owns a smuggling business whose total revenue is $30,000 per month. The accompanying table shows Lando's monthly expenses. If Lando weren't a smuggler, he would earn $6,000 per month working for the Rebel Alliance. Apart from pay, Lando is indifferent between working as a smuggler and working for the Rebel Alliance.
What is Lando's accounting profit each month?
Internal Rate
Often referring to the internal rate of return (IRR), which is the rate of growth a project is expected to generate, calculated as the rate of discount that makes the net present value (NPV) of all cash flows from a particular project equal to zero.
Net Present Value
A financial indicator that determines the variance between the current value of incoming and outgoing cash flows during a specific timeframe.
Initial Investment
The sum of funds utilized to initiate a project, investment, or business endeavor.
Cash Break-even
The point at which a business generates just enough revenue to cover its operating cash expenditures.
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