Question $2$

Claire is a talented software engineer who has been working at a large tech company for the past $7$ years. Her current annual salary is $$180,000.$ Claire has always wanted to start her own tech consulting business, and she has decided to take the plunge.

To finance her new business, Claire plans to borrow $$300,000$ from a bank at an annual interest rate at $6\%.$ The monthly rent for her new office space is $$4,500,$ and she estimates she will need to spend $$80,000$ to purchase the necessary equipment. The resale of the equipment is expected as $$60,000$ after one year of operation.

Claire has to pay $$40,000$ for decoration, which will have no resale value after one year. For staffing, Claire plans to hire two experienced consultants at $$8,000$ per month each. Additionally, she estimates the following annual operating costs:

Software licenses cost: $$45,000$

Marketing expenses: $$30,000$

Claire projects the first year's revenue for her tech consulting business to be $$600,000.$

Calculate Claire's total explicit cost, total implicit cost and economic profit$/$loss of operating her tech consulting business for the first year respectively. List the item and show your working.

$(12$ marks$)$

Remarks:

$***$If you use iPad or other similar devices to prepare your assignment, avoid using the line and curve drawing function. The sample below is NOT regarded as a handwritten work as the lines and curves are adjusted by the software, so significant mark deduction applies.

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