Oscar and Julia can both produce either bananas or coffee. Oscar can produce either 16 pounds of coffee and 0 pounds of bananas
1 answer:
Answer:
d)The opportunity cost of 1 lb. of coffee is 4 lbs. of bananas for Oscar.
Explanation:
a)The opportunity cost of 1 lb. of bananas is 4 lbs. of coffee for Oscar.
In order to produce 64 pounds of banana, Oscar has to give up producing 16 pounds of coffee, his opportunity cost is:
The statement is false.
b)Oscar has absolute advantage in the production of coffee.
Julia has a higher production capacity for coffee (20 pounds to 16 pounds) and therefore has the absolute advantage.
The statement is false.
c)Julia has comparative advantage in the production of bananas.
Julia has a higher opportunity cost for producing a pound of bananas (0.5 pounds of coffee to 0.25 pounds of coffee) and therefore does not have the comparative advantage.
The statement is false.
d)The opportunity cost of 1 lb. of coffee is 4 lbs. of bananas for Oscar.
In order to produce 16 pounds of coffee, Oscar has to give up producing 64 pounds of banana, his opportunity cost is:
The statement is true.
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Answer:
1) none of the above $3828.57 ( E )
2) $1143 ( c )
3) $24571 ( A )
4) $17142.86 ( E )
5) 12% ( B )
6) $410 ( B )
7) $2744.95 ( f )
8) $17,489 ( c )
9) $24282.36 ( F )
10) 867
Explanation:
1) The annual after-tax net returns
net income = cash flow - depreciation
= $10500 - = 10500 - (40000/7) = $4785.71
calculate the annual net after tax returns = net income * (1 - Tax rate ) = 4785 * (0.80) = $3828.57
2) Tax savings from depreciation
Tax savings from depreciation = Depreciation amount * Tax rate
=
= (40000/7) * 0.2 = $1142.86 ≈ $1143
3) After tax terminal value in three years
Sale value = $25000,
Book value = 40000 - ( 5714.29 * 3 ) = $22857.13
Gain on sale = sale value - book value = $2142.87
tax rate = gain on sale * tax rate = 2142.87 * 0.2 = $428.57
Terminal value = sales value - tax rate = 25000 - 428.57 ≈ $24571
4) Accumulated depreciation over the three years
= depreciation amount * 3 years
=5714.29 * 3 = $17142.86
5) After tax discount rate
= discount rate * (1 - tax rate )
= 15% * 0.80 = 12%
6) Present value of the after-tax net returns
SOLUTION attached below
7) Present value tax savings from depreciation
= Tax savings from depreciation / ( 1+r)^n note ; n = 3
= $1142.86 / ( 1 + 0.12 )^3 = $2744.95
8) present value of the after-tax terminal value
Pv of terminal value = Terminal value / ( 1 + r ) ^n
= $24571.43 / ( 1 + 0.12 ) ^3 = $17,489
9) Net present value
= net cash flows / ( 1 + r ) ^n
= 34114.29 / ( 1 + 0.12) ^3
= $34114.29 / 1.4049 = $24282.36
AT
