Finance Answers

Explain giving examples why it is cheaper to produce commodities in large scale.

The cost of capital is opportunity cost of finance. Explain

A company is expected to pay dividend of $6, $6, $6.50 over the next three years. A dividend of $7 is expected to be paid in the 4th year and in subsequent years it is anticipated that dividend will grow at 0.05%. If the required rate of return is 12%. Determine the value of the company's share. Will long term growth rate add value to the company if it is financed by retaining 30% of it's retained earnings.

a firms that holds cash beyond its minimum requirements is increasing its potential earnings . true or false ?

Which tax is not shifted to others ?

Consider a two-period economy here investors are endowed with income in both periods are face the same investment opportunities with certain outcomes.

Investors derive utility from consumption in both periods and the utility function is assumed to be increasing and concave.

Explain how the introduction of a perfect capital market influences investors consumption and production decisions. 

A small business promise a return of $28 000 on an initial investment of $20 000 after 5 years.

What is the internal rate of return (IRR)

Assuming that paper is sold in a competitive market, graph the PMB and the PMC curves

QUESTION TWO. (30 Marks)

The supply of paper is described by the following equation:

Qs = 5,000P (PMC)

where Qs is tons supplied per year and P is the price per ton. The demand equation is

described by:

QD = 400,000 - 1 000P (PMB = SMB)

where QD is tons demanded per year.

Because of the pollution associated with paper production, marginal external costs of K20

are associated with each ton of paper.

REQUIRED:

1) Assuming that paper is sold in a competitive market, graph the PMB and the PMC curves

2) What is the market price and how many tons of paper will be produced per year at that price?

3) Graph in the SMC curve and determine the price of the socially inefficient output given the marginal damage.

4) What would be the efficient price and the efficient annual output of paper at that point where the SMB curve is equal to the SMC curve?

5) What would be the deadweight loss of the socially inefficient output given the marginal damage?

6) How can a corrective tax achieve efficiency in this example?

If come of increase by 25%, how this increase in income will affect purchases of new cell phone and second hand bicycle?