You as a businessperson have one million dollars to invest. One option is to invest your money in a saving account that gives you 8% annual interest rate. But you decide to open a book store instead. You need to rent a place for $7900 per month and hire two workers and pay them each $6000 monthly. The other expenses such as purchases and overhead are $6500 per month. Your store generates $395,000 sales per year. How much is your economic profit? Which business do you choose? explain
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- ABCD Inc. is a shoe company, they have decided to build a new manufacturing facility because they have developed modern technology to help in the production of their sneakers. The new facility will be able to process up to 10,000 pairs of sneakers per year, but this year is only expected to produce 7,000 pairs. ABCD Inc.'s first facility uses the same technology and has processed 12,000 shoes per year with a full production capacity of 12,000. Draw the long run and short-run average cost curve for ABCD’s new facility and first facility and indicate where the MES is most likely to occur.Q5) A firm is planning to manufacture a new product. The sales department estimates that the quantity that can be sold depends on the selling price. As the selling price is increased, the quantity that can be sold decreases. Numerically they estimate: P = $35.00 - 0.02Q where P =selling price per unit Q = quantity sold per year On the other hand, the management estimates that the average cost of manufacturing and selling the product will decrease as the quantity sold increases. They estimate C = $4.00Q + $8000 where C = cost to produce and sell Q per year The firm's management wishes to produce and sell the product at the rate that will maximize profit, that is, where income minus cost will be a maximum. What quantity should the decision makers plan to produce and sell each year?A group of students decided to lease and run a gasoline service station. The lease is for 10 years. Almost immediately the students were confronted with the need to alter the gasoline pumps to read in liters. The Dayton Company has a conversion kit available for $3000 that may be expected to last 10 years. The firm also sells a $1000 conversion kit that has a 5-year useful life. The students believe that any money not invested in the conversion kits may be invested elsewhere at a 10% interest rate. Income tax consequences are to be ignored in this problem. (a) Assuming that future replacement kits cost the same as today, which alternative should be selected? (b) If one assumes a 4% inflation rate, which alternative should be selected?
- The annual income from the mine is 100,000 and the life of the mine is 20 years. Find the price that an investor is willing to pay for the mine if he considers that money is worth 5% and if he is to accumulate a sinking fund at 6% in order to replace the capital he invested.Investors put up $1040000 to construct a building and purchase all equipment for a new restaurant. The investors expect to earn a minimum return of 10 per cent on thier investment. The restaurant is open 52 weeks per year and serves 900 meals per week. The fixed costs are spread over the 52 weeks. Included in the fixed costs in 10% return to the investors and $2000 in other fixed costs. Variable costs include $2000 in weekly wages, and $600 per week in materials, electricity, etc. The restaurant charges $8 on average per meal. The operating profit per week of the restaurant is A)$0 B)$2900 C)$4600 D)$4900A machine was bought 10 years ago for 30,000 it could be sold today for 10,000 next year for 8,000 in two years for 5,000 and in 3 years for 3,000. The maintenance costs will be 25,000 in year 1, 3,000 in year 2 and 5,000 in year 3 What are the marginal costs of the machine during the first three years after the interest rate is 10% a company buys a machine for $ 10,000 with a life of 5 years, with no salvage value and no annual costs, no salvage value and no annual maintenance costs the depreciable machine with the straight-line method generates profits of 3,000 in the first year and remain constant in purchasing power for the rest of the life of the project. The company pays contributions at 40% and the interest rate is 5% suppose that it can make alternative investments that yield 8% in current dollars, which is the present value of the cash flow for the second year net of contributions.
- Compute the number of blocks that an ice plant must be able to sell per month to break-even based on the following data: Cost of electricity - P20.00/block Tax to be paid - P2.00/block Real estate tax - P3,500/month Salaries and wages - P25,000/month Others - P 12,000/month Selling price of ice - P 55/blockIn the island nation of Autarka, cardboard boxes are manufactured by four rms: Andrew'sIndustries, Brett's Boxes, Carla's Cardboard, and Delia's Durables. In Autarka, cardboard boxes are sold in bundles of 100. At present, the market price for a bundle of boxes is $30. The technology for manufacturing cardboard boxes is readily available and common to all manufacturers. The cost of plant and machinery for a rm in the box manufacturing business is $7,000,000 per year. The labour, material, and energy cost of producing abundle of 100 boxes is $20. A market study indicates that demand for cardboard boxes is given by the function,P= 40 - Q/500,000 ;where P represents the price of a bundle of 100 boxes, and Qis the total number of bundles of boxes sold each year. Assuming that firms are engaged in Cournot Competition, Using the information provided in the scenario, derive a total cost function for a typical cardboard box manufacturer. Use QA to denote the quantity produced by thetypical…In the island nation of Autarka, cardboard boxes are manufactured by four rms: Andrew'sIndustries, Brett's Boxes, Carla's Cardboard, and Delia's Durables. In Autarka, cardboard boxes are sold in bundles of 100. At present, the market price for a bundle of boxes is $30. The technology for manufacturing cardboard boxes is readily available and common to all manufacturers. The cost of plant and machinery for a rm in the box manufacturing business is $7,000,000 per year. The labour, material, and energy cost of producing abundle of 100 boxes is $20. A market study indicates that demand for cardboard boxes is given by the function,P= 40 - Q/500,000 ;where P represents the price of a bundle of 100 boxes, and Qis the total number of bundles of boxes sold each year. Using the information provided in the scenario, derive a total cost function fora typical cardboard box manufacturer. Use QA to denote the quantity produced by thetypical firm.
- 3. Union Water Purification Company (UWPC) is evaluating two possible designs for a new production facility to replace their present obsolete facility. The total cost functions for the two facilities are: TC1 = 550,000 + 600Q TC2 = 300,000 + 825Q Both plants would produce an identical desalination device that sells for $2,600 per unit. UWPC foresees no change in demand and intends to estimate sales from an average of the last seven years: Year Sales ($000) 1,100 1,075 1,200 1,250 1,150 1,100 1,125 Calculate the operating leverage for both plant designs. Find the level of production at which neither plant design has an advantage. Considering the sales information given, which plant design has a greater probability of cost savings?A company plans to design and build transport vehicles for the Army. The cost for the design is $10M. The cost for the test prototype is $2M. The cost to produce and test each production vehicle is $0.5M. What is the non-recurring cost? What is the recurring cost per vehicle? What price per vehicle must the company sell the vehicles to the government to make $50K profit per vehicle if the company sold 50 vehicles? 100 vehicles? Why does the price per vehicle go down when production goes up?Moriarty started living in his own condominium after turning 25 years old. When he turned 26, he became fond of buying a pack of Gardenia wheat bread every Saturday at 5:30PM. The price of the bread is Php85.00 per pack. Assume the following: 1. Moriarty will live until 95 years old. 2. The price of the bread will remain constant, 3. Moriarty’s purchasing habits will not change. What is the lifetime value that can be generated from Moriarty as a customer of Gardenia wheat bread?