Nan presents her plan for a slip-on shoe that is water repellent, inexpensive, and highly fashionable. She believes that the mar
1 answer:
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Answer:
NPV -6,422.07908
The investment is not profitable at current cost of capital os 11.6%
Explanation:
Sister Pools 11.6% after tax cost of capital
Contructions 10.3% after tax cost of capital
- 85,000
cash flow 17,000 for next 7 years
<u>We will calculate the present value of a 7-years annuity of 17,000 at 11.6% </u>rate
<em>We use Sister Pools rate because we are asked for this company and there is no indication about a change in the cost of capital condition.</em>
<em />
PV = 78,577.92092
<u>Next we subtract the investment cost to get the Net Present Value</u>
78,577.92092 - 85,000 = -6,422.07908
Answer:
a. $1.5; b. 10 units; c. $7; d. $6
Explanation:
There are 5 identical firms in a market.
These firms sell widgets.
The fixed cost of each firm is $9.
The marginal cost of your first through fifth widgets are $1, $2, $3, $7, and $8, respectively.
a. The total variable cost for producing two widgets
= $1 + $2
= $3
The average variable cost
=
=
= $1.5
b. The firms will supply the level of output where the price is able to cover the marginal cost of production.
At the price level $2.5, the marginal cost of producing 2 units i.e $2 is being covered. So the firms will supply 2 units each. The market supply will be 10 units.
c. The equilibrium price will be such that it is able to cover the marginal cost of production and the average variable cost.
The average variable cost
=
=
= $3.25
That price is $7, so it will be the equilibrium price.
d. In the long run, the equilibrium price will be determined at the point where price equals ATC.
The total variable cost for producing two widgets
= $1 + $2 + $3 + $7 + $8
= $21
The total cost
= TFC + TVC
= $21 + $9
= $30
The average total cost
=
=
= $6
So, the long run price will be $6.