Economics Answers

ABCcompany is considering a capital investment for which initial outlay is 500,000 and has estimated life of five years with a zero salvage value, ignoring depreciation, the machine produced following cash flows:- in year 1, $70,000, in year 2, 60,000, in year 3, 50,000, in year 4, 60,000, in year 5, 70,000 compute NPV and pay back period, discount rate is 8%, interprete your finding.

2 Cost of Preferred Stock. Micro Spinoffs also has preferred stock outstanding. The stock
pays a dividend of $4 per share, and the stock sells for $40. What is the cost of preferred
stock?
3. Calculating WACC. Suppose Micro Spinoffs’s cost of equity is 12.5 percent. What is its
WACC if equity is 50 percent, preferred stock is 20 percent, and debt is 30 percent of total
capital?

Farrelly enterprises has fixed operating cost of $500,000, variable operating cost per unit of $20 and a selling price of $40. The firm's capital structure consists of $600,000 loan at 10% interest, 10,000 shares of preferred stock paying an annual dividend of $3 per share and $50,000 shares of common stock outstanding. Farrelly has a 34% tax rate. Calculator Farrelly operating breakeven point in units and in dollar sales

Since Fall of 2013, the price of oil has shown a steady decline as continued increase of global oil production that has far exceeded the rising demand for oil. Accordingly, many analysts in the energy field have had predicted the likelihood of further decline in oil price in the US market as the US continues to expand its domestic oil production with a long term objective of becoming even net exporter of oil by Y2030. Given the significant trend of declining oil price and expected independence of oil production by US in coming decade, draw an AS/AD diagram of macroeconomics model (not oil market), explaining the effect on the US macro-economy of expected decline in oil price in 2014 and beyond. In your explanation in words with the help of the diagram, you must clearly explain the connection between changes in oil price and the fluctuations in macroeconomic fundamentals in the US economy. Then show the impact of continuos fall in oil price on the U.S. economy by using ad-as model during the recovery period 08

A 30-year maturity bond with face value of $1,000 makes annual coupon payments and has a coupon rate of 8%. What is the bond's yield to maturity if the bond is selling for $1,100?

abc company is considering a capital investment for which initial outlay is 500,000 and has estimated life of five years with a zero salvage value, ignoring depreciation, the machine produced following cash flows:- in year 1, $70,000, in year 2, 60,000, in year 3, 50,000, in year 4, 60,000, in year 5, 70,000 compute NPV and pay back period, discount rate is 8%, interprete your finding

A forklift will last for only 3 more years. It costs $5,000 a year to maintain. For $20,000 you can buy a new lift that can last for 10 years and should require maintenance costs of only $2,000 a year.

If the discount rate is 5 percent per year, should you replace the forklift?

What if the discount rate is 12 percent per year? Why does your answer change?

. For an economy with a tax rate of 10%, the following is given:
C = 60 + 0.8YD
G = 400
I = 140
NX = 10 - 0.20Y
(I) If the economy produces $1 of extra output, how much of it is;
(a). spent on domestic goods?
(b). import expenditure?
(c). saved?

Using diagrams for aggregate expenditures (AE) and aggregate demand and supply (AD-AS), show the short run effects each of the following scenarios has on the relevant economy. Be sure to identify the cause of any shift or movement along AE, AD, and/or SRAS. [Hint: Your diagrams for each part should look something like those in Figure 23-8, or 23-10 in your text.]
(a) Due to the decrease in world oil prices, Canadian oil and gas companies reduce investment spending. [4]
(b) Depreciation of the Euro leads to an increase in exports for the Euro-zone and a reduction in the marginal propensity to import in the Euro-zone. [5]
(c) Canadianproductivityrapidlyincreases,whileatthesametimeCanadianexportsincreaseduetoa growing US economy. [5]

The short run aggregate supply curve is upward sloping.
EXPLAIN. True, false, or uncertain.