Refer to the information provided in Table 8.6 below to answer the questions that follow. Table 8.6 A Hypothetical Investment Schedule Interest Rate C) Planned Invetment (S Billion) 300 270 200 12 210 15 180 18 150 Refer to Table 8.6. If the interest rate dropped from 15% to 6%, planned investment would by $ billion. Select one: O a. decrease: 270 O b. increase: 270 O c increase: 90 Od decrease: 90
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- Investors sometimes fear that a high-risk investment is especially likely to have low returns. Is this fear true? Does a high risk mean the return must be low?A consumer's income in the current period is y = 100 and income in the future period is y'= 120. He or she pays lump-sum taxes t=20 in the current period and t'= 10 in the future period. The real interest rate is 0.1, or 10%, per period. (a) Determine what the consumer's optimal current-period and future-period consump tions are, and what optimal saving is, and show this in a diagram with the consumer's budget constraint and indifference curves. Is the consumer a lender or a borrower? (b) Now suppose that instead of y = 100 the consumer has y = 140 Again, determine optimal consumption in the current and future periods and optimal saving, and show this in a dia gram. Is the consumer a lender or a borrower? (c) Explain the differences in your results be tween parts (a) and (b).2. The cash flows for an investment project are listed below. the firm will invest if the present value of the cash flows is positive. Year 1 −200 Year 2 100 Year 3 120 Should the firm undertake this project: a. If the interest rate is 5 percent? b. If the interest rate is 10 percent? 5. Given the following information, calculate tobin's q statistic: Let's suppose that a company has one million outstanding shares of stock, each valued at $25. Let us suppose also that the replacement cost of its physical capital stock is $18 million. a. Should this firm invest (net) in more physical capital?
- assume elsa has current income of $50000 and expects income of $60000 next period. interest rate is 6% elsa desires to have the same amount of consumption expenditure during both periods. in the two period certainty framework, determine how much elsa's expenditures are during each period is elsa a saver or spenderCould you expnad on how you got the equilibrium interest rate value? i don't get 0.065 when is solve the euqation 900 = 50/(1+i) + 50/(i+1)^2 + 1000/(1+i)^2. Also, my answer from plugging into the equation i part a. to find the demand and supply at YTM = 0.05, doesn't match using the same equation to get the answer?The Rosy company, is planning to start an egg packing factory in the country of Bevery. The initial investment for the egg packing factory is $5Million and it will generate net revenues for every year for the next 10 years starting as $1M in the first year, and increasing by $0.5Million every year (e.g, 1M, 1.5M, 2M, 2.5M...). Currently £1 is equal to $20. However, the $ is being devalued (losing value) against the £ by 12% every year (so next year £1 will be $22.4 ). If Rosy company has a MARR of 30% in Bevery, what is the PW of this egg packing factory in £?
- Suppose the macroeconomic parameters are as follows in Turkey. Production: Y = A K1/3 L2/3 (A= 7 ) Factor supplies: K, L (K = 3000, and L= 1300) Government: 2200, Taxes: 2000 Consumer behavior C = 1000 + 0.6 (Y-T Investment behavior | = 3000 - 1000г Compute real interest rate in Turkey (Show the percentage value as numerical such as 15 for %15 or 0.15).Bora's income in the current period is y=200, and income in the future period is y'=250. He pays lump-sum taxes t=30 in the current period and t'=10 in the future period. The real interest rate is 5%, per period.Suppose that Bora will always choose current consumption, c and the future consumption, c′ in a constant proportion:c=32c′ a) Determine the optimal current-period and future-period consumption for Bora. b) Determine the optimal saving for Bora, and show this in a diagram with his budget constraint and indifference curves, and also determine if Bora is a lender or a borrower?The demand ? (in billions of £) for a bond with coupon rate 5% and face value ?? = 1000, and two years to maturity as a function of its price ? is ? = 4000 − 2?. The supply in (billions of £)asafunctionofthepriceofthebondis ? = 2?+ 400. There is a business cycle expansion, so both supply and demand shifts. After the shift, the new demand curve is given by: ?=4000+?−2? ,whereas the new supply curve is ?=2? + 200. For which values of ? will the interest increase/decrease? Which values of ? are in line with empirical data?
- Suppose a handbill publisher can buy a new duplicating machine for $ 500 and the duplicator has a 1-year life. The machine is expected to contribute $ 550 to the year's net revenue. Instructions: enter your anwer as a whole number. What is the expected rate of return? (in percentage) If the real interest rate at which funds can be borrowed to purchase the machine is 8 percent, will the publisher choose to invest in the machine? Will it invest in the machine if the real interest rate is 9 percent? if it is 11 percent?A consumer's income in the current period is y = 100 and income in the future period is y'= 120. He or she pays lump-sum taxes t=20 in the current period and t'= 10 in the future period. The real interest rate is 0.1, or 10%, per period. (a) Determine the consumer's lifetime wealth. (b) Suppose that current and future consumptions are perfect complements for the con sumer and that he or she always wants to have equal consumption in the current and future periods. Draw the consumer's indiffer ence curves. (c) Determine what the consumer's optimal current-period and future-period consump tions are, and what optimal saving is, and show this in a diagram with the consumer's budget constraint and indifference curves. Is the consumer a lender or a borrower?14. To use the Net Present Value (NPV) method of capital budgeting, one could calculate the present value of all the future net cash flows of an investment discounted at its cost of capital, and then subtract which one of the following? OA. The salvage value OB. The present value of the salvage value OC. The initial cost of the investment OD. The initial cost of the investment less the present value of the salvage value