Chapter 7 & 8 Chapter 7: Problems 1, 6, 8, and 9 1. In the Deep Creek Mining Company example described in this chapter (Table 7.1), suppose again that labor is the variable input and capital is the fixed input. Specifically, assume that the firm owns a piece of equipment having a 500-bhp rating. a. Complete the following table: Labor Input I (No. of Workers) Total Product Marginal Product Average Product 1 3 0 + 3 = +3 3/1 = 3 2 6 6 – 3 = +3 6/2 = 3 3 16 16 – 6 = +10 16/3 = 5.33 4 29 29 – 16 = +13 29/4 = 7.25 5 43 43 – 29 = +14 43/5 = 8.6 6 55 55 – 43 = +12 55/6 = 9.17 7 58 58 – 55 = +3 58/7 = 8.29 8 60 60 – 58 = +2 60/8 = 7.5 9 59 59 – 60 = -1 59/9 = 6.56 10 56 56 – 59 = -3 56/10 = 5.6 b. Plot the …show more content…
Some of the problems that one might encounter using time-series data to estimate the parameters of this model, could be the change in the number of buses that are taken out of service each year. This is because only certain buses are taken out which means that they would not be any consistency in the amount of buses taken out. Another problem could be are all the buses. Another problem could be the condition of the bus, the bus may not be as old, but may cause problems and are taken out of service and might affect the average range of miles. Chapter 8: Problems 2(a), 4, and 6(a) 2(a) Howard Brown is a large-scale cotton farmer. The land and machinery he owns has a current market value of $4 million. Bowen owes his local bank $3 million. Last year Bowen sold $5 million worth of cotton. His variable operating costs were $4.5 million; accounting depreciation was $40,000, although the actual decline in value of Bowen’s machinery was $60,000 last year. Bowen paid himself a salary of $50,000, which is not considered part of his variable operating costs. Interest on his bank loan was $400,000. If Bowen worked for another farmer or a local manufacturer, his annual income would be about $30,000. Bowen can invest any funds that would be derived, if the farm were sold, to earn 10 percent annually. (Ignore taxes.) Compute Bowmen’s accounting profits. Revenues
For Investment B: (40 – 5)/ 30= 1.16 standard units= close to 88% to get the 40 million in
Mr. Shields’ should accept Mr. Fordham’s proposal in relation to the acquisition of Upstate Canning Company, Inc. In this case, Mr. Shields attempts to conclude if he should acquire the company from its owner, Mr. Fordham, using his personal savings of $35,000 in addition to an investment of $65,000 from his associates. Moreover, Mr. Fordham proposes that he will loan Mr. Shields’ $300,000 worth of income bonds, to be repaid in up to 10 years. Mr. Fordham provides Mr. Shields’ with a bond repayment schedule which allows Mr. Shields’ to repay the bonds at a discount if he meets the wishes to repay the bonds back early. Mr. Shields’ faces a
The fixed cost is assumed that Larry has discovered the other fixed cost incurred. The total investment is $800,000. The worst case scenario assumes that Larry got a total line of credit from the bank in the amount of $400,000 and invested $400,000 from other source. The Notes payable – short term and the long-term debt is (11.8 + 3.7) = 15.5 % from Table F in the handout. The Loan interest and payment per year is ($400,000 * 0.155)= $62,000. The Income data from Table F indicates that there is a 0.4% of all other expenses net out of the total sales which equals to $109,908 (5,700,666 gallons * $4.82 *0.4%) .
II.|Connie has an investment portfolio in excess of $450,000. She pays Chris $350 to do an analysis of her investments and make recommendations on restructuring the portfolio.|
Give an example. (5 marks) Briefly discuss whether the short-term differences between applications in (a) are removed when the investment is sold. (3 marks) Briefly suggest reasons why short-term differences may not be irrelevant. (2 marks)
* Since the capacity is being expanded to increase production of Product C, it could be assumed that this increase should be allocated to this product. Production of Product A is to be scaled down, but its level of fixed costs has been assumed to be unchanged.
A study on the reliability of public transportation found that “long, heavily used bus lines on congested roadways are likely to have poor schedule reliability” (Levinson). Lower income areas tend to have a higher population density, which increases the congestion and overall reliability of busses (Levinson). Delays at the beginning of a bus route are then propagated to later stops creating further setbacks (Levinson). Bus operators have also been found skip certain stops, if they believe they are too dangerous (Levinson). Since poor people do tend to live in more treacherous areas, this further compounds their unequal transportation
3. (10 points) Use the concepts of gross and net investment to distinguish between an economy that has a rising stock of capital and one that has a falling stock of capital. “In 1933 net private domestic investment was minus $6 billion. This means that in that particular year the economy produced no capital goods at all.” Do you agree? Why or why not? Explain: “Though net investment can be positive, negative, or zero, it is quite impossible for gross investment to be less than zero.”
In question four, Janet was asked to solve a question that deals with annuity payments, specifically, ordinary annuities. It starts by asking of how much you will make if you add $2,000 every year and it is compounded by 10% interest every year. These, for the most part, are future value problems. The first one comes out to be a future value of $12,210.20, which does not satisfy the need for $20,000. The next part asks what the value would be if the interest was compounded semiannually. You have to do an equation in order to find out what the effective annual interest rate. Through this equation you come out with a value of 10.25% and after the calculator calculations you come out with a future value of $12,271.11, also not meeting the demand for that first year of college. The next part asks what payment will you need in order to get to that $20,000 number and the present value comes to be $3,275.95. Next, the case asks what original payment you would need in order
Assessing the likelihood of each option and assigning weight to each possibility is an inexact science, but I believe it in unlikely that in the current political climate we will not see both a reduction in the tax rate and an increase in the length of time over which we are required to depreciate capital assets. I have assigned weights to each option with this in mind, and have come up with an average weighted estimate of the net present value of the investment of: $1.7 million.
In this assignment you will demonstrate your understanding of capital investment techniques by evaluating the following three case studies.
9. (Ignore income taxes in this problem.) The Crawford Company is pondering an investment in a machine that
All the costs by a company can be broken into two categories, fixed costs and variable costs. Costs that are independent of output are called fixed costs. Fixed costs remain constant throughout the relevant range and are usually considered sunk for the relevant range. Buildings and machinery are included inputs that cannot be adjusted in the short term. They are only fixed in relation to the quantity of production for a certain time period. The cost of all inputs is variable, in the long run.
Based on this these scenarios Mr. Grant would have a very difficult decision to make. Firstly, the net profit does not take into account the $500,000 investments that were made by both Mr. Grant and JTL. Secondly, the terms of the long-term loan are not made clear nor did the negotiations include an amortization schedule. As well, a long-term plan has not been made based on expected increases in private Internet usage. Finally, the probability of each scenario being realized is a very important tool to determine the expected value of Mr. Grant’s decision. If each scenario is equally likely to occur than Mr. Grant will have an expected