Assume that a firm is considering building a factory that will cost $5 million. It believes that it can get a profit from this factory of $600,000 per year for many years. The interest rate at which the firm can borrow money is 15 percent. After evaluating whether it should build the factory, the firm decides that it should Select one: a. build b. not build
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- Kendall is a successful data analyst working at Amazon. She had one passion for all these years, she loves organizing parties. She decides to quit her job that she was making $150,000 per year, and uses her $200,000 savings, on which she was earning 10 percent annual return, to start her own business. In the first year, she earns revenue of $500,000, and her costs are as follows: Lease $50,000 Utilities $8,000 Wages $32,000 Materials $26,000 Food/Beverage $50,000 a. What is Kendall’s accounting profit? b. What is Kendall’s economic profit?What does Tobin's q tell us about what determines a firm's investment decision?According to the the Tobin's q, when should a firm invest?1. In Eng Eco, we will be introduced to the cash-flow diagrams that represents how ______ earns money as the passage of time. 2. It is the quantity of commodity that is temporarily placed in the warehouse for future selling
- Question 2 Lamya has initial investment of SR45, 000. If it were to be invested on stocks, the market interest rate would be 0.12 (12%).However, the industry uses capital and labor as inputs and sells 2, 800 belts per month at SR25 market price. If the cost of the machine that produces the belts is SR 30,000 and labor cost is 20,000. Calculate the following: a. Total revenue. b. Opportunity cost of capital c. Economic profit d. Accounting profit e. From your answer in (c), is the business profitable from the economic profit point of view? Explain your answer. Question 3 The table below gives some data on the population of Crescent Highland. Use the provided information to fill the table. YEARS 1 2 3 4 5 6 7 Population: 16 Years Older or Over (Millions) LabourForce (Millions) Employed (Millions) Unemployed (Millions)…Joe, who has no skills, no job experience, and no alternative job, runs a shoeshine stand.Other shoeshine operators earn $10,000 a year. Joe pays rent of $2,000 a year, and histotal revenue is $15,000 a year. Joe spent $1,000 on equipment and used his credit cardto buy it. The interest on a credit card balance is 20 percent a year. At the end of theyear, Joe was offered $500 for his business and its equipment. Calculate Joe’sopportunity cost of production and economic profit.a) What criteria determine whether a factor is considered fixed or variable? Faced with constantly changing conditions, why would a firm ever keep any factors fixed?
- 2. A man is considering investing P500, 000 to open a semi-automatic auto-washingbusiness in a city of 400, 000 population. The equipment can wash, on the average, 12 carsper hour, using two men to operate it and to do small amount of hand work. The man plansto hire two men, in addition to himself, and operate the station on an 8-hour basis, 6 daysper week, 50 weeks per year. He will pay his employees P25. 00 per hour. He expects tocharge P25. 00 for a car wash. Out-of-pocket miscellaneous cost would be P8, 500 permonth.He would pay his employees for 2 weeks for vacations each year. Because of the length ofhis lease, he must write off his investment within 5 years. His capital now is earning 15%,and he is employed at a steady job that pays P25, 000 per month. He desires a rate ofreturn of at least 20% on his investment. Would you recommend the investment?a) Use ROR method b) Use present worth method c) Use future worth method d) Solve for the payback period and the IRRHarvey quit his job at State University, where he earned $62,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $4,000 a year. To start the business, he cashed in $50,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 10,000 units of software at $72 for each unit. Of the $72 per unit, $60 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. The economic profits of Harvey's firm in the first year werePlease no written by hand solutions K Suppose a farmer in Georgia begins to grow peaches. He uses $1,000,000 in savings to purchase land, he rents equipment for $80,000 a year, and he pays workers $150,000 in wages. In return, he produces 100,000 baskets of peaches per year, which sell for $3.00 each. Suppose the interest rate on savings is 2 percent and that the farmer could otherwise have earned $35,000 as a shoe salesman. What is the farmer's economic profit? The peach farmer earns economic profit of $ (Enter your response as an integer.)
- Why is the distinction between insurable and uninsurable risks signifificant for the theory of profit? Carefully evaluate: “All economic profit can be traced to either uncertainty or the desire to avoid it.” What are the major functions of economic profit?7.18 You are the chief learning officer for your organization and are tasked with evaluating a recent training program. What is the easiest way to accomplish this task? O Measure the return on investment. O Assess the transfer of learned skills to the job. O Test participants' knowledge and skills before and after the program OAssess participants' reactions to it.2(a) In what sense is capital productive? (b) Is interest earned?