If Jonathan received an $1200 bonus and his MPC is 0.70, his consumption rises by $ and his saving rises by $_ 800, 400 825; 375 725; 475 840; 360
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- Suppose that you plan to retire at 65. You invest $8,000 per year on your birthday for 10 years starting on your 25th and ending on your 34th birthday. Since you are young, you take more risks with your investments, and earn a rate of return of 12%. Then, you have children and decide to put all your retirement savings into investing in a college fund for them. You leave all accumulated funds in the retirement account, and it earns 6% per year, reflecting an (unwise) rise in caution during middle age. How much money will you have to retire on at 65 (31 years after you stop contributing)You are considering investing in ICI. Suppose ICI is currently undergoing expansion and is not expected to change its cash dividend while expanding for the next 4 years. This means that its current annual $3.00 dividend will remain for the next 4 years. After the expansion is completed, higher earnings are expected to result causing a 30% increase in dividends each year for 3 years. After these three years of 30% growth, the dividend growth rate is expected to be 2% per year forever. If the required return for ICI commonstock is 11%, what is a share worth today?XYZ corporation has budgeted P300,000 per year to pay for labor over the next five years. If thecompany expects the cost of labor to increase by P10,000 each year, what is the expected cost ofthe labor in the first year, if the interest rate is 10%
- Rob is considering a new marketing campaign to promote his new widgets. He currently buys his widgets for $40 and sells them for $100. His most recent sales for 2022 were 50,000 widgets. I he campaign is expensive and advertising and other costs of promotion will be $500,000; however, he believes the campaign will increase sales by 10% over his 2022 sales. Rob wonders if this campaign is a good investment and wants to calculate the return on his $500,000 marketing campaign. Using the space below, demonstrate how an ROl calculation could help Rob make the best decision.John and Peter are two representative consumers/investors who maximize the utility of consumption. John's utility of consumption is characterized as ln(x) + 2ln(y) while Peter puts more weight on the current consumption level and has a utility function of 2ln(x) + ln(y). John has a wealth of ($10, $20) thousand, while Peter has a wealth of ($20, $15) thousand now and next year, respectively. (a) What are the optimal consumption plans forJohn and Peter,respectively,if the interest rate is 5% per annum? (b) If John and Peter are the only investors/consumers, what is the equilibrium interest rate? (c) Further to part (b), how much do they borrow or lend to each other?If Jack received a $1,000 bonus and his MPS is 0.25, his consumption rises by $________ and his saving rises by $________. Group of answer choices 750; 250 850; 150 150; 500 1,000; 150
- Suppose the Internal Rate of Return (IRR) of this investment opportunity is 15%. Based on this information alone, should Limitless Ltd. make the investment? Why? Would this decision be consistent with that from B? Explain your reasoning. Suppose that, instead of paying the initial £500,000 now, Limitless Ltd. decides to pay it in equal instalments over the next 10 years. How much would the company need to pay each year to make all these payments equivalent to £500,000 today? Now assume that an alternative project would generate immediate (time zero) net profits of £500,000 upfront, but after that, it would result in annual losses of £120,000 over the next five years, and then the annual losses of £60,000 over the following five years. The cost of capital is 12% and the IRR is 15%. Should you start this project? Explain your reasoning. Would you make the same decision based on NPV and IRR? Why?The set-up remains deterministic (i.e., no uncertainty) and has two periods. c is period 1 consumption and c' is period 2 consumption. S is savings, w is wealth, and r is the return on saving. max [w.r.t c, S] {U(c) + W (c') subject to - c + S <= w c' <= (1 + r)S Inada conditions hold max [ w.r.t S] {U(w - S) + W (S(1 + r))} (a) Solve for optimal savings as a function of r and w. (b) Assuming W = W (c) = U(c) = c^1-γ / (1-γ), γ >= 0, solve for ∂S/∂r and show that if γ f γ > 1, ∂S/∂r < 0; if γ = 1, ∂S/∂r = 0 (c)Try to explain intuitively what these results in (b)A study by the New York Federal Reserve Bank concludes that an engineering bachelor’s degree generates approximately a 15% return on investment over the course of a decade. Suppose the typical engineering student spends $15,000 per year for four years on his/her education. What extra annual return (in dollars) does the typical student realize during the 10 years following graduation? State your assumptions.
- Now suppose you invest in both a factory and the research for the production of Green jetpacks. Look at the factory and research as a total investment. Calculate the net present value (NPV) before tax on the investment based on the following information: The investment cost is paid in full in quarter 0, and the cost of the factory is 100000 while the cost of the research is also 100000. The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0 Only green jetpacks should be produced at the factory throughout its lifetime. There is no investment in research to streamline production or material consumption. Suppose the quarterly demand in the market is constant and given at P = 338 - 0.018 * Q, where P is price and Q is the number of jetpacks in demand. There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 248 each. You produce as much as you sell. The costs…firm decides to invest X units of capital in Project A and Yunits of labour in Project B. iv. The expected return for each unit of investment is $500 in Project A and $1500 in Project B. However in order to meet the expectations of the firm's ethical and environmental policy values of X and Y must satisfy the constraint x+y-5x-6y= 210. How many units of each type should firm buy in other to maximize total volume? What is the implication of a unit change in investment in capital and (or) Labour Economic Analysis?A university student recieved $1,000 upon graduation at age 20 years. This person washired by one of the largest global petrochemical companies soon after graduation withan expected annual income of $250. Assume that the retirement age is 65 years andlife expectancy is 85 years in the country in which the student resides. Given that thiscountry has zero real interest rate and consumption smoothing is optimal for allindividuals:a. Derive an expression for the person’s average propensity to consume.b. State in one sentence how the consumption puzzle is addressed
