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2 years ago

The kinked-demand curve of an oligopolist is based on the assumption that

Business

1 answer:

masha68 [24]2 years ago

5 0

Answer:

competitors will follow a price cut but ignore a price increase.

Explanation:

The Kinked demand curve model of oligoplolist is based on the assumption that competitors will follow price cut but ignore a price increase because of interdependence among firms price is rigid in oligopoly market. When a firm raises the price of its products none of its competitors will follow the same whereas in case firm reduces its price its competitors will follow the same.

Thus, it is prudent behaviour on the part of a firm not to change in the prices of its products frequently. It is because this reaction of rival firms, the demand curve face by an oligopoly firm has a kink. The kink is formed at prevailing price level.

The portion of demand curve above the kink is more elastic implying, when oligopolist increase the price of its product none of its competitors will follow it with expectation to capture the market demand created due rise in prices by first firm.

The lower portion of the kink is relatively inelastic showing that in case an oligopolist reduces its price its rival firms will also reduce their prices with a view to not to lose their market demand. Thus, it will not beneficial for the oligopolist in either of the situations. Therefore, it will stick to the prevailing price.

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Calvert Corporation expects an EBIT of $25,300 every year forever. The company currently has no debt, and its cost of equity is

Nataly [62]

Answer:

Value of the company = $124,019.61

Explanation:

The value of then firm is the present value of its expected future cash inflow discounted at its required rate of return.

In this case, the earnings available to ordinary shareholders becomes the annual cash inflow while the appropriate discount rate is the cost of equity.

The absence of debt in the company's capital structure implies that the cost of equity would be the appropriate discount rate.

And the value of the company would be determined as follows

Value of the company = Earnings after tax/Cost of equity

Earnings after tax = EBIT × (1-Tax rate)= 25,300×(1-0.25)=18,975

Cost of equity = 15.3%

Value of the company = 18975 /0.153= 124,019.6078

Value of the company = $124,019.61

4 0

2 years ago

Urban’s, which is currently operating at full capacity, has sales of $47,000, current assets of $5,100, current liabilities of $

Nataly_w [17]

Answer:

AE = Increase in Assets - Increase in Liabilities - Profit × (1- payout ratio)

= [($51,500 + $5,100)×0.03 - ($6,200)×0.03 - ($47,000×1.03×0.05)×(1-0)]

= -$908.50

Here, it can be clearly denoted that the firm does not need to raise the additional equity .

Explanation:

Given :

Sales = $47,000

Current assets = $5,100

Current liabilities = $6,200

Net fixed assets = $51,500

Profit margin = 5 %

Sales are expected to increase by 3 percent next year

∴

The additional equity financing(AE) can be computed as follow:

AE = Increase in Assets - Increase in Liabilities - Profit × (1- payout ratio)

= [($51,500 + $5,100)×0.03 - ($6,200)×0.03 - ($47,000×1.03×0.05)×(1-0)]

= -$908.50

Here, it can be clearly denoted that the firm does not need to raise the additional equity .

6 0

2 years ago

At its height, what percentage of american workers were employed in an automotive-related industry?

USPshnik [31]

The percentage of American workers that were classified as employed in the industry that is automotive-related is only 20%. There were only 2 out 10 Americans who are working on this job. Automotive jobs cover auto dealerships, and manufacturing plants.

7 0

2 years ago

Read 2 more answers

Using the Indirect Method to create the Statement of Cash Flows, which of the following options are correct in describing what m

Gwar [14]

Answer:

a) A gain is subtracted from net income.

d) An increase in operating current assets is subtracted from net income.

e) A decrease in operating current liabilities is subtracted from net income.

Explanation:

Operating activities: It involves those transactions that affect the after-net income working capital. It would subtract the rise in current assets and a decrease in current liabilities while add a decrease in current assets and an increase in current liabilities.

It would modify those changes in working capital. For addition, the depreciation costs are added to the net income and the loss on the sale of assets is applied, while the gain on the sale of assets is excluded

So, the following options are used-

a) A gain is subtracted from net income.

d) An increase in operating current assets is subtracted from net income.

e) A decrease in operating current liabilities is subtracted from net income.

8 0

2 years ago

A vacation house in Colorado is

stellarik [79]

Answer:

A vacation house in Colorado is rival in consumption and excludable.

The correct answer is C

Explanation:

A vacation house in Colorado is rival in consumption and excludable because it is a private good.

3 0

2 years ago