Economic Income

Can someone explain to me the economic income?

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


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.

and what is economic depreciation?

the decrease in market value of the investment

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.

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