Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 24, Problem 2SPA
To determine
Identify the value of M’s capital at the end of 2018.
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Question 1
Currently, Jason is the shop manager of a famous cake shop and his annual salary is $390,000. Wealth
accumulation is always his goal, so after having been working for 5 years in the same cake shop,
Jason plans to start his own business - a pie-and-tart shop. The following is his draft business plan:
.
To finance his new business, he needs a start-up capital of $400,000. He plans to withdraw fund
from his investment account that earns interest of 5% steadily every year.
The rental contract of his new shop is one year and the monthly rental payment is $25,000.
⚫ His best friends promise to decorate the shop without charge as a gift to celebrate his new career
development; Jason will save $120,000 for decoration.
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resale value of these items is $80,000 after a year of operation.
Apart from these, he would recruit two full-time shop assistants with monthly salary of $11,000 per…
1. The following table presents some data from I.M. Farmer's income statement. Use the
information to compute values for each of the items listed below.
+
Total revenue
Net farm income
Average net worth
Average asset value
Interest expense
a. Rate of Rate of return on assets
b. Rate of return on equity_
C. Return to family labor_
$120,000 Total operating expenses
$36,000
Opportunity cost of labor
$180,000 opportunity cost of management
$360,000 Opportunity cost of capital
$12,000
d. Return to management_
%
%
e. Assess the profitability of I.M. Farmer's business, and explain your answer.
$72,000
$20,000
$5,000
12%
2.
A friend has started a business selling software. The software is a great
hit, and the firm quickly grows large enough to sell stock. Your friend's firm promises
to pay a dividend of $5 per share every year for the next 50 years, at which point your
friend intends to shut down the business. The firm's stock is currently selling for $75
per share. If you believe that the company really will pay dividends as stated and if
you require a 10% rate of return to make this investment, should you buy the stock?
Briefly explain.
Chapter 24 Solutions
Macroeconomics
Ch. 24.1 - Prob. 1RQCh. 24.1 - Prob. 2RQCh. 24.1 - Prob. 3RQCh. 24.1 - Prob. 4RQCh. 24.2 - Prob. 1RQCh. 24.2 - Prob. 2RQCh. 24.2 - Prob. 3RQCh. 24.2 - Prob. 4RQCh. 24.2 - Prob. 5RQCh. 24.3 - Prob. 1RQ
Ch. 24.3 - Prob. 2RQCh. 24.3 - Prob. 3RQCh. 24.3 - Prob. 4RQCh. 24.3 - Prob. 5RQCh. 24.3 - Prob. 6RQCh. 24.4 - Prob. 1RQCh. 24.4 - Prob. 2RQCh. 24.4 - Prob. 3RQCh. 24 - Prob. 1SPACh. 24 - Prob. 2SPACh. 24 - Prob. 3SPACh. 24 - Prob. 4SPACh. 24 - Prob. 5SPACh. 24 - Prob. 6SPACh. 24 - Prob. 7SPACh. 24 - Prob. 8SPACh. 24 - Prob. 9SPACh. 24 - Prob. 10SPACh. 24 - Prob. 11SPACh. 24 - Prob. 12SPACh. 24 - Prob. 13APACh. 24 - Prob. 14APACh. 24 - Prob. 15APACh. 24 - Prob. 16APACh. 24 - Prob. 17APACh. 24 - Prob. 18APACh. 24 - Prob. 19APACh. 24 - Prob. 20APACh. 24 - Prob. 21APACh. 24 - Prob. 22APACh. 24 - Prob. 23APACh. 24 - Prob. 24APACh. 24 - Prob. 25APACh. 24 - Prob. 26APACh. 24 - Prob. 27APACh. 24 - Prob. 28APACh. 24 - Prob. 29APACh. 24 - Prob. 30APA
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