Elon works for a consultancy and currently has a wage of 500,000 kronor per year. He considers two options for the future, either switch to a new job at a bank that offers 600,000 kronor per year or to start a company that produces a new product that he calls Hyperloops. If he starts the company he would invest all his savings of 1 million kronor on this which would have an alternative return of 80,000 kronor per year. He expects to hire services from technical consultants for 100,000 kronor per year. Production would take place in an old factory that he would rent for 100,000 kronor per year. What is the accounting cost of running Hyperloop one year? What is the economic cost?
Elon works for a consultancy and currently has a wage of 500,000 kronor per year. He considers two options for the future, either switch to a new job at a bank that offers 600,000 kronor per year or to start a company that produces a new product that he calls Hyperloops. If he starts the company he would invest all his savings of 1 million kronor on this which would have an alternative return of 80,000 kronor per year. He expects to hire services from technical consultants for 100,000 kronor per year. Production would take place in an old factory that he would rent for 100,000 kronor per year. What is the accounting cost of running Hyperloop one year? What is the economic cost? Which one is the relevant in deciding whether to start Hyperloop or not?
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