Economic Income

CFA Level II Equities
#1

Can someone explain to me the economic income?

I get the logic behind Economic profits but fail to understand economic income.

Thanks.

#2

It’s basically the realization of the profit on your investment in any given year.

So if you have an investment you entered into at a 10% IRR, you should essentiatlyl be returned 10% of your investment each year, through the life of the investment. This 10% is your economic income, and is measured as: (ending market value of investment - beginning market value of investment ) + cash flow recieved on investment.

#3

and what is economic depreciation?

#4

the decrease in market value of the investment

#5

it takes into accounthe the valeui of your PPE or asset that is giving you earning.

example you bought a machine that is not depricaiting, economic income will take that in account base don marktet prioce.

#6

so fair to say that economic profit considers the opportunity cost, while economic income you are breaking even with the discount rate?