Suppose there are currently 80 machines, depreciation is 10% and the optimal capital stock for next...
Suppose there are currently 80 machines, depreciation is 10% and the optimal capital stock for
next year (where MPK=UC) is 92 machines. What should net and gross investment equal in this
case?
Homework Answers
Current capital is 80 machines.
Depreciation is 10%. Depreciation = 0.1*80 = 8 machines.
So, the capital remaining after depreciation for the next year = 80 - 0.1*80 = 72 machines.
For the next year, the optimal stock is 92 machines.
So, the gross investment will be 92-72 = 20 machines
The net investment = Gross investment - Depreciation
Net investment = 20 - 8 = 12 machines.
IF YOU FIND THIS ANSWER HELPFUL, PLEASE UP VOTE.
Add Answer to:
Suppose there are currently 80 machines, depreciation is 10% and
the optimal capital stock for
next...
Assume that a firm has future marginal productivity of capital given by MPK = A(100-K). The...
Assume that a firm has future marginal productivity of capital given by MPK = A(100-K). The price of capital (machine) is $20,000, the real interest rate is 10%, and capital depreciates at a 10% rate. Assume further that each unit of output sells for $50. A) Calculate the user cost of the capital (in real term) that the firm faces. B) Assume A=1, then calculate the desired capital stock. What is the firm’s gross investment if the firm currently has...
1. Assume that a firm has future marginal productivity of capital given by MPK-A(100-K). The price...
1. Assume that a firm has future marginal productivity of capital given by MPK-A(100-K). The price of capital (machine) is $20,000, the real interest rate is 10%, and capital depreciates at a 10% rate. Assume further that each unit of output sells for $50. A) Calculate the user cost of the capital (in real term) that the firm faces. B) Assume A-1, then calculate the desired capital stock. What is the firm's gross investment if the firm currently has 10...
The equation for the marginal productivity of capital is given by MPK-1,000 10 The price of...
The equation for the marginal productivity of capital is given
by
MPK-1,000 10 The price of a unit of capital is 2,000 The rate of depreciation is: 5% per year. The real interest rates: 9% per year If the existing level of capital Kt is equal to 60 units, what is the level of gross investment? It = units (enter your answer rounded to one decimal place)
Suppose that in the country of Economia: Depreciation = $80 billion, Gross Investment = $100b, Net...
Suppose that in the country of Economia: Depreciation = $80 billion, Gross Investment = $100b, Net Exports = - $30b, Government Expenditure = $80b, Imports = $50b, and Consumption = $120b. What does Exports equal as a percent of GDP? Select one: a. 22.6% O b. 29.6% O c. 7.4% O d. 14.3% e. 11.1%
For any economy with an existing capital stock of $800 million and annual depreciation of 5%...
For any economy with an existing capital stock of $800 million and annual depreciation of 5% a steady state occurs if gross investment = $840 million gross investment = $1600 million gross investment = $40 million net investment = $5 million net investment = $800 million
P6.2 A 25-room budget motel expects its occupancy next year to be 80%. The owners' investment...
P6.2 A 25-room budget motel expects its occupancy next year to be 80%. The owners' investment is $402,800. They want an after-tax return on their investment of 15%. Tax rate is 25%. Interest on a long-term mortgage is 10%. Present balance outstanding is $806,400. Depreciation rate on the building is 10% of the present book value of $700,200. Depreciation on the furnishings and equipment is at 20% of the consolidated present book value of $150,400. Other known fixed costs total...
Consider ABC stock is currently selling at $90. Assume that next period the stock price will...
Consider ABC stock is currently selling at $90. Assume that next period the stock price will be either $117 or $80. Assume also that there is a call option with exercise price of $92 and risk free interest rate is 4%. i. Show the evolution of both ABC stock price and call option written on it. ii. Find the no arbitrage value of the call option using BOP. iii. Suppose the call option currently is trading at $16 in the...
2. A car company currently has capital stock of $100 million and desires a capital stock...
2. A car company currently has capital stock of $100 million and desires a capital stock of $110 million. a. If it experiences no depreciation, how much will it need to invest to get to its desired level of capital stock? b. If its annual depreciation is 5%, how much will it need to invest to get to its desired level? c. If its annual depreciation is 10%, how much will it need to invest to get to its desired...
Suppose the hourly wage is $10, the price of each unit of capital is $20, and...
Suppose the hourly wage is $10, the price of each unit of capital is $20, and the price of output is $60 per unit. Assume that the firm cannot affect any of these prices. The production function of the firm is 7. a. Find the MPE (4 pts) b. If the firm is maximizing profits, what must the ratio of MPE to MPK be? What must the ratio of E to K be? Hint MPK-dQ/dK 1/3K23 E (2 points) c....
Suppose IBM's stock price is currently $100. In the next year it will either fall to...
Suppose IBM's stock price is currently $100. In the next year it will either fall to $70 or rise to $130. What is the price today of a one-year European call option on IBM with an exercise price of 100? The one-year risk-free interest rate is 2% per year. 6 10 0 15.69
1. Assume that a firm has future marginal productivity of capital given by MPK-A(100-K). The price of capital (machine) is $20,000, the real interest rate is 10%, and capital depreciates at a 10% rate. Assume further that each unit of output sells for $50. A) Calculate the user cost of the capital (in real term) that the firm faces. B) Assume A-1, then calculate the desired capital stock. What is the firm's gross investment if the firm currently has 10...
The equation for the marginal productivity of capital is given
by
MPK-1,000 10 The price of a unit of capital is 2,000 The rate of depreciation is: 5% per year. The real interest rates: 9% per year If the existing level of capital Kt is equal to 60 units, what is the level of gross investment? It = units (enter your answer rounded to one decimal place)
Suppose that in the country of Economia: Depreciation = $80 billion, Gross Investment = $100b, Net Exports = - $30b, Government Expenditure = $80b, Imports = $50b, and Consumption = $120b. What does Exports equal as a percent of GDP? Select one: a. 22.6% O b. 29.6% O c. 7.4% O d. 14.3% e. 11.1%
P6.2 A 25-room budget motel expects its occupancy next year to be 80%. The owners' investment is $402,800. They want an after-tax return on their investment of 15%. Tax rate is 25%. Interest on a long-term mortgage is 10%. Present balance outstanding is $806,400. Depreciation rate on the building is 10% of the present book value of $700,200. Depreciation on the furnishings and equipment is at 20% of the consolidated present book value of $150,400. Other known fixed costs total...
Suppose the hourly wage is $10, the price of each unit of capital is $20, and the price of output is $60 per unit. Assume that the firm cannot affect any of these prices. The production function of the firm is 7. a. Find the MPE (4 pts) b. If the firm is maximizing profits, what must the ratio of MPE to MPK be? What must the ratio of E to K be? Hint MPK-dQ/dK 1/3K23 E (2 points) c....
Suppose IBM's stock price is currently $100. In the next year it will either fall to $70 or rise to $130. What is the price today of a one-year European call option on IBM with an exercise price of 100? The one-year risk-free interest rate is 2% per year. 6 10 0 15.69
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 11 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 11 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 11 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 11 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 11 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 11 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 11 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 11 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 11 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 11 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 11 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 11 months ago