Finance Formulas / July 17, 2018 / Rory Wise
Economic profit is a measurement of opportunity cost. Opportunity cost is the value of the trade-off when a decision is made. For example, an individual may consider returning to school to get a degree but in doing so, needs to quit his current job. The individual should consider not only the cost of tuition and books, but the income he forgoes by pursing a degree. This lost opportunity to make money, or opportunity cost, is the underlying purpose of calculating economic profit.
Their simplicity makes them a popular option; no need to attempt to time the market or worry about distribution timing. Also, immediate payment annuities, as opposed to front-loaded annuities, can help lower taxes by deferring payments to a time when the annuitant is in a lower tax bracket.
We Also Think You’ll Like