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Personal Finance & Savings

Net Present Value Method

1. - Colgate Distributing Company has the option to provide to its sales representatives a car or reimburse them the mileage for the use of its own cars. If the company provides the car, it will pay all the expenses related to it, including gas for business travels. The estimations are as follow: Car cost $15,000 Estimated Li

Assume the U.S. decides to implement a system of national

Assume the U.S. decides to implement a system of national health insurance that provides to all citizens a basic benefit package that covers most necessary services. Those who wish to purchase private insurance may do so, but they will not be covered by national insurance and will have to pay all their medical expenses. What do

State government leby tariffs on imports

Why not have State governments levy tariffs on imports, or tax other states' products. Would this be a sensible way to raise revenues? What are the advantages/disadvantages? Provide research to support positions. Brief with bullet points will suffice.

medical research and training

Who should pay the costs of medical research and the costs of training new physicians? Should these be paid by the government through Medicare and Medicaid? By government directly through tax dollars? By health insurers? Consider each and explain why you think it is appropriate or not.

Summarize the provisions of HSAs.

The Medicare Modernization Act of 2004 included a provision authorizing the establishment of health savings accounts or HSAs. Such accounts have been proposed in the past, both in this country as medical savings accounts (MSAs) and in other countries, as one mechanism to extend health insurance to those without it and to provide

Some of our individual needs for health care services later in life are determined by choices we ourselves make earlier in life regarding our individual lifestyle. If you believe you will be covered by insurance or other third party payers later in life, how might this influence your individual behavior while young, and hence total demand for health care services for older people?

Some of our individual needs for health care services later in life are determined by choices we ourselves make earlier in life regarding our individual lifestyle. If you believe you will be covered by insurance or other third party payers later in life, how might this influence your individual behavior while young, and hence to

Find total benefit.

Suppose a firm is considering two different activities, activities X and Y, which yield the following schedule of total benefits shown below. The price of X is $2 per unit and the price of Y is $10 per unit. Total benefit of Total benefit of Level of Activity

Maximum Utilitarian Welfare in an Exchange Economy

Consider the problem of a social planner who wants to maximize utilitarian welfare in an exchange economy with two people. His objective is thus maxu1 + u2 ,where u1 and u2 are the utilities of the two individuals. Both have the same utility overconsumption c, so ui = u(ci ) = ln ci , i=1,2 (ln stands for the natural logarithm)

Health insurance and the rise of managed care are investigated.

In 1986, the US federal income tax system changed marginal tax rates so that the top marginal rate fell from 50 to 33 percent. Given the way that fringe benefits are negotiated, what would you expect to happen to the demand for health insurance as a fringe benefit? Why? Suppose, as a worker, your health insurance currently al

The poverty rate and the effects of in-kind transfers.

The poverty rate would be substantially lower if the market value of in-kind transfers were added family income. The largest in-kind transfer is Medicaid, the government health program for the poor. Let's say the program costs $7,000 per recipient family. a. If the government gave each recipient family a $7,000 check instead of

The ATR as a percentage of economic profit

A corporation has $7 million in equity. During the tax year it takes in $4 million in receipts and earns $2 million in capital gains from the sale of a subsidiary. It incurs labor costs of $250,000, material costs of $500,000, and pays rent for structures of $250,000. Calculate the corporation's total accounting profit and, assu

Five case studies in optimization theory

Using optimization theory, analyze the following quotations: a. The optimal number of traffic deaths in the United States is zero. b. Any pollution is too much pollution. c. We cannot pull U.S. troops out of Iraq. We have committed so much already. d. If Congress cuts out the NASA space station, we will have wasted all th

Optimal capital structure to minimize cost of capital

ROE Starsburg electronics has never used debt, but the treasurer is considering a possible change in the capital structure. For now, assume that only two financing options are being considered for a firm that currently has $200,000 in total assets â?" remaining at zero percent debt (i.e. $200,000 equity) or shifting to $1

Capital Budgeting: proposed acquisition of a new spectrometer for the firm

Capital Budgeting You have been asked by the President of your company to evaluate the proposed acquisition of a new spectrometer for the firmâ??s R&D department. The equipmentâ??s base price is $75,000 and it would cost another $15,000 to install it. The spectrometer falls under 3-year MACRS schedule and will be sold aft

Consumer theory: Budget lines and indifference curves

See the attached diagram. A consumer is in equilibrium at point A. The price of good X is $5. a) What is the price of good Y? b) What is the consumer's income? c) At point A, how many units of good X does the consumer purchase?

Marginal analysis and fixed & variable costs

Consider the following costs of owning and operating a car. A $25,000 Ford Taurus financed over 60 months at 7 percent interest means a monthly payment of $495.03. Insurance costs $100 a month regardless of how much you drive. The car gets 20 miles per gallon and uses unleaded regular gasoline that costs $3.50 per gallon. Fi

Taxpayer's Marginal Tax Rate (MTR)

A worker lives in a state that has its own income tax. The worker is in the 31 percent federal tax bracket. In addition, he is subject to a 9 percent MTR for his state income tax. Assume that mortgage interest is deductible both on his federal and state income tax, and that state income taxes are deductible on the federal inc

Calculate present worth, future worth and annual worth

Which of the four projects listed blow would you choose if you only want to invest in one project if the criteria is a) Present Worth, b) Future Worth or c) Annual Worth? All projects are for five years and the risk-free interest rate is 10%. Invest $14,000 today and receive $25,000 in five years. Invest $10,000 today, rece

case study

Global Insurance is a disability insurance company. Traditionally, it has organized its corporate headquarters around functional specialties. After an application for an insurance policy arrives at headquarters from a field agent, it is processed through a series of functional departments. One department checks to see if th

Finance: Capital budgeting explained

A manufacturing company is thinking of launching a new product. The company expects to sell $950,000 of the new product in the first year and $1,500,000 each year thereafter. Direct costs including labor and materials will be 55% of sales. Indirect incremental costs are estimated at $80,000 a year. The project requires a new pla

Compare insurance premiums. Predict which will be higher.

Life insurance companies require applicants to submit to a physical examination as proof of insurabiltiy prior to issuing standard life insurance policies. In contrast, credit card companies offer their customer a type of insurance called "credit life insurance" which pays off the credit card balance if the cardharolder dies. W

Substitution effect & income effect (with graphs)

Managers are very interested in how a consumer makes a choice among alternatives. In this exercise, we ask you to consider the amount of money you spend purchasing gasoline to operate your automobile for a month and any alternatives available to you assuming your net income available to make those purchases. Also assume gasoline

WAAC and Market Weights

Webster Company has compiled the information show in the following table. Source of Capital Book Value Market Value After-Tax Cost Long-Term Debt $4,000,000 $3,840,000 6.0% Preferred Stock 40,000 60,000 13.0% Common Stock Equity 1,060,000

Six common short-answer questions on economics tests, along with sample answers.

a. Describe an externality created by a firm in your state. b. What are the social costs associated with the externality? c. List three remedies that the federal, state, or local government could introduce to reduce the problem. d. Why is it important for a profit maximizing firm to consider market structure in determin

Managerial Economics

Three college students consider the option of forming a lawn care and landscaping business during their summer vacation. They estimate the following costs: Insurance $2,600 Equipment Rental Fees 1,000 Fuel and Supplies $4 per lawn Miscellaneous

problem 7.4 in Nicholson

This corresponds to problem 7.4 in Nicholson (notes are available online from the publisher, SW learning, but they are not necessary). Suppose there is a 50-50 chance that a risk-averse individual with a current wealth of $20,000 will contract a debilitating disease and suffer a loss of $10,000. A. Calculate the cost of ac