1. What is a budget constraint? How does a budget constraint explain consumer choices when used in conjunction with indifference curves? Explain what happens if a household looses half of their income, using a budget constraint and indifference curves in your discussion. 2. There are 168 hours in a week. Of these, about 60 h
Chapter 10 2. Do you agree with the following statements? Why or Why not? a. The benefits of corrective taxes as a way to reduce pollution have to be weighed against the deadweight losses that these taxes cause. b. When deciding whether to levy a corrective tax on consumers or producers, the government should be careful to
A skier needs two pair of skis for every pair of bindings, due to wear and tear. Income equals $3600. Skis are $480 per pair bindings are $240 per pair. What is the skiers' best affordable bundle of skies & binding, given this information?
Mrs. Hotdrinks enjoys coffee (C) and tea (T) according to the function U(C.T)= 3C + 4T. Her drinks budget is $5 per day, the price of a cup of coffee is $1, and the price of a cup of tea is $1. Explain the number of C's and T's she'll buy daily.
What is the relationship if any, between the trade deficit and the budget deficit? I think the answer is that trade brings in money whether through importing or exporting. If there is a problem with trade it could cause good or bad problems with the budget. I think really they are a reflection of one another.
Calculate the value of the asset given the following information: Asset invoice $1,500,000 Cost of capital 15% Cash flow (YR 1) $350,000 Cash flow (YR 2) $500,000 Cash flow (YR 3) $720,000 Salvage value (end of YR 3) $750,000 Remaining depreciation (end of YR 3) $600,000 Tax rate 40%.
From the following financial data, calculate the value of the firm: After-tax operating cash flow (YR 1) $50,000,000 After-tax operating cash flow (YR 2) $53,000,000 After-tax operating cash flow (YR 3) $57,000,000 Terminal cash flow $762,375,000 Cost of debt (after-tax) 4.5% Tax rate 40% Cost of equity
You are the administrator for a medical practice. The majority of your patients is covered by a certain insurance plan. The insurer has revised patient cost sharing for some services. Service Patient's Share old new 1 20% 30% 2 10% 10% 3 20% 10% Estimate what will happen to the revenue of the practice. Use t
Happy Valley is considering moving from its present location into a new 200-bed facility. The estimated construction cost for the new facility is $40 million. The hospital has no internal funds and is considering a 20-year mortgage with interest scheduled to be eight percent. The issue will be repaid over 20 years with equal ann
A firm has a debt-to-equity ration of 1. Its (levered) cost of equity is 16% and its cost of debt is 8%. If there were no taxes, What would be its cost of equity if the debt-to-equity ratio were zero? A company has a debt to total value ratio of 0.5 . The cost of debt is 8% and that of unlevered equity is 12%. Calculate the
A. What is an externality?b Provide examples.c Is it possible for a governmentâ??s solution to a market failure to actually worsen the failure? Explain your answer.Based on your observations, how are economic policies impacted by politics, and how does politics make a positive or a negative contribution to economic policy?
A. What is an externality? b. Provide examples. c. Is it possible for a governmentâ??s solution to a market failure to actually worsen the failure? Explain your answer. Based on your observations, how are economic policies impacted by politics, and how does politics make a positive or a negative contribution to
Trident Food Corporation generated th following income statement for the most recent fiscal year. Trident December 31, 2008 Sales Revenue $150,000 Variable Cost of Sales (112,500) Gross profit 37,500 Fixed Operating Cost 24,000 Net Operating Income (EBIT) 13,500 Interest (10,000) Earnings Before Taxes 3,500 Taxes
Strategic Systems expects to have a net income of $650,000 during the next year. Its target and current capital structure is 40% debt and 60% common equity. The Director of Capital Budgeting has determined that the optimal capital budget for next year is $1.0 million. If strategic uses the residual dividend model to determine ne
What is the basic difference between using a subsidy to induce producers to install antipollution equipment and a tax on producers who pollute?
M Corporation's common stock is currently selling for $50 per share. The current dividend is $2 per share. If dividends are expected to grow at 6% per year and if the flotation costs are 10%, then what is the firm's cost of retained earnings and what is the cost of new common stock? The capital budgeting director of SP Corpo
Assume that Reynold's tax rate is 40% and the equipment's depreciation would be $100 per year. If the company leased the asset on a 2-year lease, the payment would be $110 at the beginning of each year. If Reynolds borrowed and bought, the bank would charge 10% interest on the loan. In either case, the equipment is worth nothing
Lowry Department Store is located in midtown Metropolis. During the past several years, net income has been declining because suburban shopping centers have been attracting business away from city areas. At the end of the company's fiscal year on November 30, 2010, these accounts appeared in its adjusted trial balance. Acc
Over the past decade medical costs have increased more rapidly than other prices. In order to illustrate how rising medical costs have affected consumer alternatives, let X represent the quantity of medical services, and let Y represent the quantity of other goods. Furthermore, let income (M) be measured in hundreds of dollars,
Milton Industries expects free cash flow of $5 million each year. Milton's corporate tax rate is 35%, and its unlevered cost of capital is 15%. The firm also has outstanding debt of $19.05 million, and it expects to maintain this level of debt permanently. a. What is the value of Milton Industries without leverage? b. What
Grommit Engineering expects to have net income next year of $20.75 million and free cash flow of $22.15 million. Grommit's marginal corporate tax rate is 35%. a. If Grommit increases leverage so that its interest expense rises by $1 million, how will its net income change? b. For the same increase in interest expense, how w
You work for a mortgage company that is contemplating leasing a high speed document scanner. The scanner costs $3,000,000, and it would be depreciated to zero over four years. Because of the non-existent 2nd hand commercial market, it will actually be completely valueless in four years. You can lease it for $895,000 per year for
Given three goods with the symbols, 'x', 'y', and 'z', each with respective prices. Additionally, you also have budget or money income denoted as 'I' that combination of goods that will maximize the individual's utility. Discuss how an individual would change his purchasing behavior, if at the current bundle the MUx/Px > M
1. Briefly explain whether or not the Prisoners' Dilemma has a first-mover advantage. 2. Briefly discuss the rationale for an insurance company including a deductible on a typical policy. 3. Consider sales taxes. If the goal of government is to raise tax revenue when imposing such taxes, which category of goods should t
Axel Telecommunications has a target capital structure that consists of 70 percent debt and 30 percent equity. The company anticipates that its capital budget for the upcoming year will be $3,000,000. If Axel reports net income of $2,000,000 and it follows a residual dividend payout policy, what will be its dividend payout rat
Please show works where applicable. Use the table for the question(s) below. Consider a project with the following cash flows: Year Cash Flow 0 -10,000 1 4,000 2 4,000 3 4,000 4 4,000 1) Assume the appropriate discount rate for this project is 15%. The payback period for this proje
As you are getting ready for your first day of work, you realize that you have several options of how to get to the bank on Wall Street. You could drive your car and look for street parking, or you could park in a parking garage. You might even take a taxi or the subway. You must get to work, so time is scarce. Then again, you a
The F. Nutt Corporation follows a strict residual dividend policy. Its debt-equity ratio is 3. a. If earnings for the year are $180,000, what is the maximum amount of capital spending possible with no new equity? b. If planned investment outlays for the coming year are $760,000, will F. Nutt pay a dividend? If so, how much
The Heuser Company's currently outstanding bonds have a 10% coupon and a 12% yield to maturity. Heuser believes it could issue new bonds at par that would provide a similar yield to maturity. It its marginal tax rate is 35%, what is Heuser's after tax cost of debt? After tax cost of debt = interest rate - tax savings Aft
Apply the Theory of Constraints to the healthcare environment. Explain why healthcare doesn't have unlimited resources. Explain why there are always limits to what healthcare can do.
The subject is illegal immigration and its impacts upon the American economy. Present the economic implications (pro and con) of the current immigration situation and discuss what you would recommend as a solution(s) to this problem. This is a very open ended type of analysis and there is no one specific solution--use your ana