Economics Answers

What is the reason for increasing opportunity costs? Why do the production frontiers of different nations have different shapes? 

Why does a production frontier that is concave from the origin indicate increasing opportunity costs in both commodities? What does the slope of the production frontier measure? How does the slope

change as the nation produces more of the commodity measured along the horizontal axis? more of the commodity measured along the vertical axis? 

. Blue Enterprises paid a Birr 2.50 per share dividend on 100,000 shares of common stock and Birr 4 per share dividend on 25,000 shares of preferred stock. Net income for the year was Birr 850,000. The current market price of the common stock is Birr 52.50 a) Calculate the earnings per share of common stock. c) Calculate the dividend payout ratio of common stock d) Calculate the dividend yield of common stock

6. Complete the following financial statements of Omega Company on the basis of the ratios given below. Omega Company Profit and loss account For the year ended June 30 2001 Sales 2,000,000 Cost of Goods Sold 600,000 Gross Profit 1,400,000 Operating Expenses 1,190,000 Earnings Before Interest and Tax A Debenture Interest 10,000 Income Tax B Net Profit C Omega Company Balance sheet For the year ended June 30 2001 Assets Liabilities Cash D Sundry creditors 60,000 Stocks E 10% Debentures I Debtors 35,000 Total liabilities J Total Current Assets F Reserve and Surplus K Fixed Assets G Share Capital L Total Assets H Total Liability and Equity M Additional Information: A. Net Profit to Sale 5%     D. Inventory Turnover 15 times B. Current Ratio  1.5     E. Share Capital to Reserve 4:1 C. Return on Net Worth  20 %   F. Tax Rate  50 %  

 1. Use the following information to answer questions Lite Products, Inc. is considering investing in either of two competing projects that will allow the firm engineering department narrowed the alternatives down to two- Status Quo (SQ) and High Tech estimates of the cash flows for SQ and HT over the relevant six-year time horizon. The firm has an 11 percent required return and views these projects as equally risky. Project SQ     Project HT Initial Outflow (CFo)   $670,000  $940,000 Year (t)                             Cash Inflows (CFt)   1    $250,000  $170,000   2   200,000  180,000   3    170,000  200,000 4    150,000  250,000 5    130,000  300,000 6    130,000  550,000 A. Based on the information given above, calculate the net present value (NPV) for each asset respectively. (Round to the nearest four decimal points or use table value).B. Which asset is best, using the NPV? 

products corporations have the following capital structure, which it considers optimal: Bonds, 7% (at par)                    Br 300,000   Preferred stock, Br.5                    240,000 Common stock                        360,000 Retained earnings                      300,000                                                   1,200,000 

GG fund invested in 1,000 units of 7 percent, 15-year, RM1,000 bond issued by SLC

Bhd. The bond was issued on 1/11/2018 at par. The firm bought the bonds on 1/11/2021

when the bond was selling at 2% discount. The firm intends to sell back all the bond when

the interest rate is expected to be at 5% on 1/11/2026. Throughout the period of holding

the bond, the firm reinvest all the coupons received in an investment alternative that pays

8% interest for the 1st 3 years and 9% interest for the remaining years. You

are required to assist GG fund to determine:

i) their total yield from this bond investment

ii) total capital gain from this investment

A fund manager with the Ariri Fund Management, is contemplating between these bonds to be added to one of the firm’s balanced funds and balanced out the risks in the fund. Among the criteria he is looking for is a bond with an A and above rating, has less than 5 years to maturity and less volatile towards the changes in the interest rate. Listed are the corporate bonds available today.

BOND RATING COUPON (%) TERM TO MATURITY PAR VALUE ($)

A A 5 2 1,000

B A 7 10 1,000

C AA 4 3 1,000

D BB 6 4 1,000

The pandemic has eroded the value of money and lower down the purchasing power. He

expects that the interest rate is rising to 7 percent soon from the existing rate of 5 percent.

Based on the information given, his criteria, and modified duration; assist him to choose

one bond from the listed bonds.

A fund manager is considering incorporating a bond investment into the company's

investment portfolio. The manager is interested to know about the sensitivity of the

proposed bond towards the changes in the interest rate before making any decision for

his bond investment. The following is detailed information regarding the proposed bond

investment.

Bond RAG25:

Time left to maturity = 3 years and six months

Yield to maturity = 5 3⁄4 percent

Par value = RM1,500

Coupon = 6 percent

Using both duration and convexity, compute the estimated price, if the current market

interest rate is expected to reduce by 75-basis point.

3.Assum that the total expenditure of a consumer on two goods X and Y is birr 2000 and

prices of good X and Y are birr 50 and birr 40 respectively .Then formulate his budget

equation and sketch the graph.