Economics Answers

what are social and economic implications of the inadequate provision of social-rented housing in South African cities?

1

A company is regarded to have a separate legal entity under the new Companies Act

71 of 2008.This means that the company can transact, contract, sue and be sued in

its own name. Historically, directors and shareholders would hide under the company

for any fraudulent activities or transactions by relying on the separate juristic

personality. The courts have developed a doctrine which disregards this separate

juristic personality.

1.1. Name and briefly define the doctrine developed by the courts to disregard the

separate juristic personality (5)

1.2. With reference to case law fully discuss the common law purpose and the

scope of doctrine.

Mr. Atiamoh believes that all the two projects have risk characteristics similar to the average risk of the firm and hence NextG’s cost of capital of 10 per cent will apply to them and both investment projects have zero scrap value. The company’s current return on capital employed is 12 per cent (average investment basis) and the company uses straightline depreciation over the life of projects. Year Project (A) Gh₵ Project (B) Gh₵ 0 (110,000) (200,000) 1 45,000 50,000 2 45,000 50,000 3 30,000 50,000 4 30,000 100,000 5 20,000 55000 Required a) Advise NextG’s executive committee which project should be undertaken if: i. the net present value method of investment appraisal is used; [8 marks] ii. the internal rate of return method of investment appraisal is used; [8 marks] b) Critically discuss the reasons for superiority of the net present value method over the other methods. Is the internal rate of return method now redundant? [ 9 marks]

Mr. Atiamoh believes that all the two projects have risk characteristics similar to the average risk of the firm and hence NextG’s cost of capital of 10 per cent will apply to them and both investment projects have zero scrap value. The company’s current return on capital employed is 12 per cent (average investment basis) and the company uses straightline depreciation over the life of projects. Year Project (A) Gh₵ Project (B) Gh₵ 0 (110,000) (200,000) 1 45,000 50,000 2 45,000 50,000 3 30,000 50,000 4 30,000 100,000 5 20,000 55000 Required a) Advise NextG’s executive committee which project should be undertaken if: i. the net present value method of investment appraisal is used; ii. the internal rate of return method of investment appraisal is used; b) Critically discuss the reasons for superiority of the net present value method over the other methods. Is the internal rate of return method now redundant? [ 9 marks]

In the pure exchange economy solve for the competitive equilibrium when endowments are as follows:

e¹₁,.e¹₂.e¹₃.......=1,0,0,1,0,0,1,...

e²₁,e₂²,e₃²,...,...=0,1,1,0,1,1,0,...

1.a) Suppose u(x1,x2) = x1^a, x2^(1-a) . Given M, P1, and P2 derive the demands for the two goods: Solve for MU1, MU2 and the MRS. Now use the tangency condition MRS =-p1/p2

together with the budget line to solve for X1 (M, P1, P2) and X2 (M,P1, P2). b) Now suppose a = 1. Further, suppose M 12, P1 = 2 and P2 = 2. Draw the budget set and show the optimal point chosen by this consumer (using your demands in a)). Include a reasonable sketch of an indifference curve through the optimal point. c) Keep all parameters as in b) the same except now raise Pi to 4. Draw the new budget set and show the new optimal point chosen by this consumer. Include a reasonable sketch of an indifference curve through this optimal point. d) Now set a = 1/3 but go pack to the original prices and income of b). Draw the budget set and show the optimal point chosen by this consumer. Include a reasonable sketch of an indifference curve through this optimal point.