Posted by Allan on .
The Midnight Hours, a local nightclub earned 100,000 in accounting profits last year, this year the owner, who had invested 1,000,000 in the club, decide to close the club. What can you say about the economic profit (and the rate of return) in the night-club business?
Take a shot, what do you think?
Hint: be sure to distinguish between economic profits and accounting profits.