The equilibrium quantity is 39.6. In other words, when the price is 20.6, the quantity demanded by the market is equal to the quantity supplied by the market.
Qd=122-4*p Supply: Qs=19+1*pTo find the equilibrium quantity, we have to set these two equations equal to each other: Qd = Qs122-4p = 19+p122-19 = 4p+p103 = 5p p = 20.6
Now we substitute the value of p = 20.6 in either equation to find the equilibrium quantity. Let's use the demand equation: Qd = 122 - 4 * pQd = 122 - 4 * 20.6Qd = 122 - 82.4Qd = 39.6
Therefore, the equilibrium quantity is 39.6. In other words, when the price is 20.6, the quantity demanded by the market is equal to the quantity supplied by the market.
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What is the legal effect of the term "As Is" or "As-Is Sale" in
the CAR® RPA in
relieving the seller’s broker/agent of obligations under the
Agent’s Visual
Inspection Disclosure (AVID)?
a
The term "As Is" or "As-Is Sale" in the CAR® RPA (California Residential Purchase Agreement) relieves the seller's broker/agent of obligations under the Agent's Visual Inspection Disclosure (AVID).
When the term "As Is" or "As-Is Sale" is used in the CAR® RPA, it signifies that the property is being sold in its current condition, without any warranties or guarantees from the seller. This means that the seller's broker/agent is not responsible for disclosing any visual defects or issues with the property through the AVID form.
The buyer is expected to conduct their own inspections and assessments to determine the condition of the property. By accepting the property in an "As Is" condition, the buyer acknowledges that they are assuming the risks associated with any existing or potential defects, relieving the seller's broker/agent from liability in relation to the AVID obligations.
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A firm has a production function given by Q = K0.2L0.8. Suppose that each unit of capital cost is r and each unit of labor cost is w.
First, we focus on the producer behavior.
Solve the cost minimization problem and derive the optimal labor and capital, given a production level Q.
Derive the equation that represents the firm’s expansion path.
(Extra credit bonus question) Let CL(Q) denote the long-run cost function. This can be expressed as CL(Q) = Ccoef(r, w)Q. Note that Ccoef(r, w) only depends on r and w. Calculate Ccoef(r, w).
Next, introduce the market. The demand function is given by Q = 40 – 4P. Fix c = Ccoef(r, w) in (d), (e) and (f). Thus, the cost function is given by C(Q) = cQ, i.e., the marginal cost is c.
Suppose the market is perfectly competitive. Calculate the profit-maximizing price and quantity.
Suppose the market is monopolistic. Calculate the profit-maximizing price and quantity.
Following (e), suppose the market is monopolistic. Calculate the total surplus (TS).
(Extra Credit Bonus Question) Following (e) and (f), suppose the market is monopolistic. Instead of using the fixed marginal cost at c, use Ccoef(r, w) for the marginal cost. Calculate how many times the effect of 1% increasing in w on TS is compared to 1% increasing in r. (Evaluate the effect as a percentage.)
In this scenario, the firm's production function is given by Q = K^0.2L^0.8. By solving the cost minimization problem, we can determine the optimal combination of labor and capital for a given production level Q. The firm's expansion path represents the relationship between the optimal input levels and the corresponding output levels.
In the long run, the cost function can be expressed as CL(Q) = Ccoef(r, w)Q, where Ccoef(r, w) depends on the prices of capital (r) and labor (w). By fixing Ccoef(r, w) and considering the demand function Q = 40 - 4P, we can calculate the profit-maximizing price and quantity for both perfectly competitive and monopolistic market scenarios. For a perfectly competitive market, the profit-maximizing price and quantity can be determined based on the intersection of the demand curve and the marginal cost curve, which is equal to c in this case. In a monopolistic market, the profit-maximizing price and quantity can be calculated by setting marginal revenue equal to marginal cost, considering the firm's monopolistic power to set prices. To calculate the total surplus (TS) in a monopolistic market, we need to find the area between the demand curve and the marginal cost curve up to the profit-maximizing quantity.
For the extra credit bonus question, we compare the effect of a 1% increase in labor cost (w) versus a 1% increase in capital cost (r) on the total surplus (TS) by evaluating the percentage difference using the respective cost coefficients. To provide a comprehensive explanation for this multi-part question, it would require detailed calculations and derivations. However, I can offer a brief overview of the concepts involved. In the first part, the cost minimization problem involves finding the optimal combination of labor and capital that minimizes the firm's cost while achieving a given production level. This can be done by setting up the Lagrangian equation and solving for the optimal input levels. In the long run, the cost function CL(Q) is a function of output (Q) and is expressed as Ccoef(r, w)Q, where Ccoef(r, w) represents the cost coefficient that depends on the prices of capital (r) and labor (w). Calculating the total surplus (TS) in a monopolistic market requires finding the area between the demand curve and the marginal cost curve up to the profit-maximizing quantity. This area represents the consumer surplus, and the difference between this and the firm's profit represents the total surplus. For the extra credit bonus question, the effect of a 1% increase in labor cost (w) versus a 1% increase in capital cost (r) on the total surplus (TS) is compared by evaluating the percentage difference using the respective cost coefficients.
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the distinctive characteristic of enterprise risk management erm is the
Enterprise Risk Management (ERM) is distinguished by its comprehensive and integrated approach to controlling risks throughout an organisation.
Enterprise Risk Management (ERM) is a framework and procedure that enables organisations to recognise, evaluate, and take a comprehensive approach to managing risks. Its complete and integrated approach to risk management is what makes ERM unique.
ERM takes into account risks across the entire organisation, in contrast to traditional risk management techniques that concentrate on specific issues or walled departments. It entails recognising and assessing risks at multiple levels, including as regulatory, financial, operational, and strategic risks. ERM enables organisations to comprehend the interdependencies and potential effects of risks on their goals by taking a comprehensive approach to risks.
The organization's overall strategic planning and decision-making processes are integrated with risk management through ERM. It entails setting up a framework for managing risks, putting risk assessment techniques into practise, and creating plans for risk monitoring and mitigation.
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How is CSR connected with the course outcomes ?
Who might benefit from exploring ethical communication?
What could be improved about ethical communication?
What are some weaknesses in ethic?
Course outcomes are the educational goals or expected achievements of a specific course.
Corporate Social Responsibility (CSR) is a concept in which a company is responsible for its social and environmental impacts in addition to its economic activities.CSR is related to course outcomes in that it encourages students to think critically and engage with social issues that affect the business world. Understanding the connection between CSR and course outcomes is crucial for the development of responsible business leaders. CSR should be included as a part of course learning outcomes in business courses and programs.
Professionals in any field may benefit from exploring ethical communication as it will help them in establishing and maintaining good relationships with others and avoiding misunderstandings. It will also aid in developing a sense of trust and respect with others, which is essential for building a positive reputation.
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Question 3 PART A The owner of Plants 'R' Us is preparing her accounts for the year ended 31 December 20X4. She has prepared a list of inventory in her shop on accounting year end date, but is unsure how to value the following items: Description Quantity Purchase price Note Expected sales price per item per item E £ Potted roses 5 3.99 2.99 Plastic plant pots 45 0.40 0.50 Bay trees 24.75 28.75 2 Notes: 1. The potted roses have been in the shop for some time and have already finished flowering. They can only be sold at a discounted price. 2. In order to sell the bay trees, the owner will need to repot them as they have outgrown the containers they are currently in and do not look very attractive. She estimates the new pots will cost a further £5 for each tree Required: What is the total accounting value of the inventory at the year ended 31 December 20X4? Justify your answer. (9 Marks)
The accounting value of the inventory at the year ended 31 December 20X4 is £[math]111.20[/math].Inventory is a current asset in accounting, and it refers to a company's unsold goods ready for sale.
To value the inventory, companies should use either the cost of the inventory or the net realizable value, whichever is lower. In the case of Plants 'R' Us, the total accounting value of the inventory is calculated as follows: Quantity Purchase price per item. Expected sales price per item. Total cost Total expected revenue. Total accounting value Potted roses52.99 (purchase price)2.99 (expected sales price)£19.95 (£3.99 x 5)£14.95 (£2.99 x 5)£5.00 Plastic plant pots450.50 (purchase price)0.50 (expected sales price)£22.50 (£0.50 x 45)£22.50 (£0.50 x 45)£0.00 Bay trees24.75 (purchase price)28.75 (purchase price + £5 new pot cost)2 (expected sales price)£609.38 (£24.75 x 24.75)£49.50 (£2 x 24.75)£559.88 (£609.38 - £49.50)Total accounting value£111.20.
The accounting value of the inventory at the year ended 31 December 20X4 is £[math]111.20[/math]. This means that the total cost of the inventory for Plants 'R' Us is £96.25, and the net realizable value is £111.20. As the net realizable value is higher than the total cost, the total accounting value of the inventory is £111.20.
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As a group, take a look at Exhibit 3–6 "Responses to Job Dissatisfaction" in your e-text. As a discussion, each member should come up with a time that they experienced job dissatisfaction choosing which of the four options were used to express your dissatisfaction, how it happened and why each person believes they responded that way. Summarize and compile your answers into a Word Document and submit here. Assignment should be approximately 2 pages in length and should address each of the four options whether each group member experienced each or not.
Exit. Actively attempting to leave the organization, including looking for a new position as well as resigning. This action is destructive from the point of view of the organization. Researchers study individual terminations and collec- tive turnover, the total loss to the organization of employee knowledge, skills, abilities, and other characteristics.109
• Voice. Actively and constructively attempting to improve conditions, including suggesting improvements, discussing problems with superiors, and some forms of union activity.
• Loyalty. Passively but optimistically waiting for conditions to improve, including speaking up for the organization in the face of external criticism and trusting the organization and its management to "do the right thing."
• Neglect. Passively allowing conditions to worsen, including chronic absen- teeism or lateness, reduced effort, and increased error rate. This action is destructive from the point of view of the organization
A measure of a worker's contentment with their job, whether they like the job or specific features or facets of occupations, such as the nature of the labor or supervision, is called job satisfaction, employee satisfaction, or work satisfaction.
The cognitive (or evaluative), affective (or emotional), and behavioral components of job satisfaction can all be assessed. Researchers have also observed that different work satisfaction measures vary in how much they capture thoughts or feelings about the job (cognitive job satisfaction) or both (affective job satisfaction).
According to Hulin and Judge (2003), work satisfaction encompasses multidimensional psychological reactions to a person's employment that include cognitive (evaluative), affective (or emotional), and behavioral elements.
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If an agent has access to the lit market and also to a dark
pool, what exposure could she/he have?
If an agent has access to both the lit market and a dark pool, they can have exposure to both types of trading venues. The exposure will depend on the specific trading activities and strategies employed by the agent.
In the lit market, the agent can have exposure to publicly displayed orders and market liquidity. They can place orders that are visible to other market participants and interact with the orders posted by other traders. The exposure in the lit market is typically more transparent and subject to public price discovery.
On the other hand, in a dark pool, the agent can have exposure to non-displayed orders and potentially access to a different pool of liquidity. Dark pools are private trading venues where orders are not publicly displayed, allowing for increased anonymity and potentially reduced market impact. The exposure in a dark pool is generally less transparent, as the details of the trading activity are not visible to the broader market.
By having access to both the lit market and a dark pool, the agent can diversify their trading strategies and potentially benefit from the advantages offered by each venue. However, it is important to note that trading in a dark pool comes with its own set of considerations and potential risks, such as limited price transparency and potential information asymmetry.
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If the marginal propensity to consume is 0.8Yd and government expenditures (G) increase by $50.0 billion while investment (I) decreases by $20.0 billion. How much does income increase? a. $150 billion b. $10 c. $30 d. $120 and. $$12
To determine the change in income, we need to consider the marginal propensity to consume (MPC) and the changes in government expenditures (G) and investment (I). The income increases by $30 billion. Option c, $30, represents the correct answer.
Given an MPC of 0.8Yd, an increase in government expenditures by $50 billion, and a decrease in investment by $20 billion, we can calculate the change in income.
The marginal propensity to consume (MPC) of 0.8Yd indicates that 80% of disposable income (Yd) is spent. When government expenditures (G) increase by $50 billion and investment (I) decreases by $20 billion, the net effect on aggregate demand can be calculated.
The increase in government expenditures of $50 billion directly contributes to aggregate demand, while the decrease in investment of $20 billion reduces aggregate demand. The net increase in aggregate demand is the difference between the two changes.
To calculate the change in income, we can use the multiplier effect. The multiplier is calculated as 1 / (1 - MPC). In this case, the multiplier is 1 / (1 - 0.8) = 5.
Multiplying the net change in aggregate demand ($50 billion - $20 billion) by the multiplier (5) gives us the change in income:
Change in income = (Net change in aggregate demand) * Multiplier
= ($50 billion - $20 billion) * 5
= $30 billion
Therefore, the income increases by $30 billion.
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Net Present Value Method-Annuity Jones Excavation Company is planning an investment of $125,000 for a bulldozer. The bulldozer is expected to operate for 1,000 hours per year for five years. Customers will be charged 590 per hour for bulldozer work. The bulldozer operator costs $30 per hour in wages and benefits. The bulldozer is expected to require annual maintenance costing $7,500. The bulldozer uses fuel that is expected to cost $15 per hour of bulldozer operation. Present Value of an Annuity of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.8930.870 0.833 1.833 1.736 1.690 1.626 1.528 2.673 2.487 2.402 2.283 2.106 3.465 3.170 3.037 2.855 2.589 4.212 3.791 3.605 3.353 2.991 4.917 4.355 4.111 3.785 3.326 5.582 4.868 4.564 4.160 3.605 6.210 5.335 4.968 4.487 3.837 6.802 5.759 5.328 4.772 4.031 107.360 6.145 5.6505.019 4.192 a. Determine the equal annual net cash flows from operating the bulldozer Jones Excavation Company Equal Annual Net Cash Flows Cash inflows: Hours of operation 1,000 Revenue per hour Revenue per year $ 90,000 Cash outflows: Hours of operation Fuel cost per hour Labor cost per hour Total fuel and labor costs per hour Fuel and labor costs per year Maintenance costs per year Annual net cash flows Feedback b. Determine the net present value of the investment, assuming that the desired rate of return is 10%. Use the table of present value of an annuity of $1 table above. Round to the nearest dollar. Present value of annual net cash flows Amount to be invested Net present value c. Should Jones invest in the bulldozer, based on this analysis? because the bulldozer cost is the present value of the cash flows at the minimum desired rate of return of 10%. d. Determine the number of operating hours such that the present value of cash flows equals the amount to be invested. Round interim calculations and final answer to the nearest whole number. hours
Annuity factor at 10% for 5 years is 3.7908 (From the PV of annuity table)H = $125000 / ($514.91 × 3.7908) = 65.60 hours, which is equal to 66 hours (rounded to the nearest whole number)
(a)Determination of the equal annual net cash flows from operating the bulldozer Jones Excavation Company Cash inflows:
Hours of operation = 1000
Revenue per hour = $590
Revenue per year = $590 × 1000
= $590000
Cash outflows:
Fuel cost per hour = $15
Labor cost per hour = $30
Total fuel and labor costs per hour = $15 + $30 = $45
Fuel and labor costs per year = $45 × 1000
= $45000
Maintenance costs per year = $7500
Annual net cash flows = Cash inflows − Cash outflows− Maintenance costs
= $590000 − $45000 − $30000
= $515000
Jones Excavation Company's Equal Annual Net Cash Flows = $515000
(b)Determination of the net present value of the investment, assuming that the desired rate of return is 10%. Use the table of present value of an annuity of $1 table above.
Present Value of Annual Net Cash Flows:
Using the formula for present value of an annuity:
PV = Pmt × Present value factor at 10% = $515000 × 4.1699
= $2142615
Amount to be Invested = $125000
Net Present Value = PV - Amount to be invested
= $2142615 - $125000
= $2017615
(c)Jones should invest in the bulldozer as the net present value of the investment, assuming that the desired rate of return is 10% is positive.
(d)Determination of the number of operating hours such that the present value of cash flows equals the amount to be invested.
From part (b), we know that the present value factor at 10% for 5 years is 4.1699, and the present value of annual net cash flows is $2,142,615. Let's assume that the number of operating hours to recover the $125,000 investment is H.
Present value of annual net cash flows per hour = $2142615 / (4.1699 × 1000) = $514.91
Present value of the annual net cash flows, in general, is the amount of the constant periodic payment (Pmt) times the present value of an annuity of $1, with the appropriate number of periods (n), and the appropriate interest rate (r).$2142615 = Pmt × 4.1699 (Present value factor at 10% for 5 years)Pmt = $2142615 / 4.1699 = $514.91
If the bulldozer operates for H hours per year, the annual net cash flow will be $514.91H. We can set up an equation for the number of hours that must be worked each year to earn $125,000 over five years.$125000 = $514.91H × Annuity factor at 10% for 5 years
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Analyse the key risks for bank business models emerging from
inflation.
Inflation can pose several key risks for bank business models. Here are some of the major risks that banks may face due to inflation:
Interest Rate Risk: Inflation often leads to higher interest rates set by central banks to control inflationary pressures. As interest rates rise, banks that hold long-term fixed-rate assets may face a decline in the value of these assets, leading to potential losses. Additionally, higher interest rates can result in reduced loan demand, impacting the profitability of banks.
Credit Risk: Inflation can impact the credit quality of borrowers. During periods of high inflation, borrowers may face difficulties in repaying their loans due to increased costs of living and reduced purchasing power. This can lead to an increase in loan defaults and non-performing assets, affecting banks' profitability and asset quality.
Liquidity Risk: Inflation can disrupt the liquidity position of banks. When inflation rises, central banks may respond by tightening monetary policy, which can result in increased borrowing costs and reduced availability of liquidity in the financial system. This can make it more challenging for banks to meet their short-term funding requirements and maintain adequate liquidity buffers.
Asset-Liability Mismatch: Inflation can create a significant asset-liability mismatch for banks. If banks hold long-term fixed-rate assets (such as mortgages) while their liabilities (such as deposits) are short-term or adjustable-rate, rising inflation can erode their net interest margin. Banks may find it challenging to reprice their liabilities to match the higher interest rates in the market, resulting in reduced profitability.
Operational Risk: Inflation can introduce operational risks for banks. As inflation erodes the purchasing power of currencies, transaction costs and operational expenses may increase. Banks may need to invest in upgrading their systems, processes, and infrastructure to adapt to changing market conditions, which can add to their operational costs.
Capital Adequacy Risk: Inflation can impact the capital adequacy of banks. Inflation erodes the real value of capital over time, potentially reducing a bank's capital adequacy ratio. If banks fail to maintain sufficient capital buffers, they may face regulatory challenges and limitations on their lending capacity.
Customer Behavior and Demand: Inflation can alter customer behavior and demand for banking products and services. As the cost of living rises, customers may prioritize spending on essential goods and services, resulting in reduced demand for credit and other financial products. Banks may need to adjust their product offerings and marketing strategies to cater to changing customer preferences.
Macroeconomic Uncertainty: Inflation introduces macroeconomic uncertainty, which can have a broader impact on the banking industry. Uncertainty regarding inflation rates, economic growth, and market conditions can affect banks' decision-making, investment activities, and risk appetite. Banks may need to continuously monitor and adapt to changing macroeconomic conditions to mitigate potential risks.
It's important to note that the impact of inflation on bank business models can vary based on factors such as the economic environment, regulatory framework, risk management practices, and the overall resilience and adaptability of individual banks.
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To find the cost of capital, one finds the simple average of the
after tax cost of debt, cost of common stock and cost of preferred
stock. Group of answer choices
True
False
To find the cost of capital, one finds the simple average of the cost of the different capital components. The capital components include debt, preferred stock, and common equity.
The cost of each component is weighted by the proportion of that component to the total capital structure. After finding the cost of each capital component, we can calculate the weighted average cost of capital (WACC). The WACC is the average cost of all the capital components weighted by their respective proportions in the capital structure. It is the minimum return that a company must earn on its assets to satisfy its creditors, investors, and stockholders. The WACC is important for determining which projects a company should invest in, as it gives a measure of the rate of return that is required for a project to be profitable.
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Get towards come to you Lining to down ande Consider the market for Rainbow sandals. Suppose average household income increases from $41 thousand to $64 thousand per year. As a result Using the midp
:Suppose the average household income increases from $41 thousand to $64 thousand per year and we are asked to consider the market for Rainbow sandals.
The percentage change in the price of Rainbow sandals and the quantity of Rainbow sandals demanded can be calculated using the midpoint method.The formula for the percentage change in the price of Rainbow sandals using the midpoint method is:(Q2 - Q1) / [(Q1 + Q2) / 2] × 100where Q1 is the initial quantity demanded, and Q2 is the new quantity demanded after the change.The formula for the percentage change in the average price of Rainbow sandals using the midpoint method is:(P2 - P1) / [(P1 + P2) / 2] × 100where P1 is the initial price, and P2 is the new price.The midpoint formula for elasticity is:(Q2 - Q1) / [(Q1 + Q2) / 2] × 100 / (P2 - P1) / [(P1 + P2) / 2] × 100To compute the percentage change in the quantity of Rainbow sandals demanded, the midpoint formula can be used as follows:Using the midpoint formula:(Q2 - Q1) / [(Q1 + Q2) / 2] × 100= [(2400 - 2000) / [(2400 + 2000) / 2]] × 100= 400 / [4400 / 2] × 100= 400 / 2200 × 100= 18.18%The percentage change in the quantity of Rainbow sandals demanded is 18.18%.
The percentage change in the average price of Rainbow sandals using the midpoint method is calculated as follows:Using the midpoint formula:(P2 - P1) / [(P1 + P2) / 2] × 100= [($45 - $50) / [($45 + $50) / 2]] × 100= -$5 / [95 / 2] × 100= -$5 / 47.5 × 100= -10.53%The percentage change in the average price of Rainbow sandals using the midpoint method is -10.53%.The price elasticity of demand for Rainbow sandals is calculated using the midpoint formula.Using the midpoint formula:(Q2 - Q1) / [(Q1 + Q2) / 2] × 100 / (P2 - P1) / [(P1 + P2) / 2] × 100= 18.18% / (-10.53%)= -1.73LONG ANSWER:Therefore, the elasticity of demand for Rainbow sandals is -1.73. This implies that Rainbow sandals are elastic, and a 1% change in the average price of Rainbow sandals would cause a 1.73% change in the quantity of Rainbow sandals demanded. A household that earns an additional $23,000 per year can buy more Rainbow sandals, and the percentage change in quantity demanded is 18.18%. This increase in quantity demanded is significant, but it is still not enough to offset the loss in revenue caused by the decrease in the price of Rainbow sandals. A decrease in the price of Rainbow sandals would result in a 10.53% decrease in the average price of Rainbow sandals, which is significant and will result in a decrease in the total revenue from the sale of Rainbow sandals.
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Determine the annual percentage yield for an annual percentage rate of 7% for quarterly and monthly compounding periods.
Annual percentage yield (APY) is the rate of return earned on an investment over a year, with all interest or dividends reinvested.
The formula to calculate the annual percentage yield is as follows.
APY = (1 + r/n)n - 1, where r is the annual percentage rate and n is the number of compounding periods per year.
For quarterly compounding periods.
APY = (1 + 0.07/4)4 - 1APY = (1.0175)4 - 1APY = 0.0718 or 7.18%.
For monthly compounding periods.
APY = (1 + 0.07/12)12 - 1APY = (1.0058)12 - 1APY = 0.0723 or 7.23%.
Therefore, the annual percentage yield for an annual percentage rate of 7% for quarterly compounding periods is 7.18%, and for monthly compounding periods is 7.23%.
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Using a sample from a population of adults, to estimate the effects of education on health, we run the following regression: hypertension, = a + Beduc; + YX¡ + Ei where hypertension is a dummy variable equals one if a person suffers from hypertension and zero otherwise, educ is years of schooling, and X is a vector of demographic variables such as age, gender, and ethnicity. (a) Show that educ in the regression above is likely to be endogenous and discuss the consequences of this on the OLS estimators. (b) Evaluate whether a government policy that requires children to complete twelve years of schooling is a good instrumental variable for educ.
Answer:
(a) To show that educ in the regression is likely to be endogenous, we need to identify a potential source of endogeneity. One possible source is omitted variable bias, where there are unobserved factors that affect both education and hypertension. For example, individuals with better health may be more likely to complete higher levels of education.
Explanation:
If educ is endogenous, it implies that the OLS (Ordinary Least Squares) estimators will be biased and inconsistent. The OLS estimators rely on the assumption that educ is exogenous, meaning it is not correlated with the error term in the regression equation. However, if educ is endogenous, it means that educ is correlated with the error term, and the OLS estimators will be biased.
The consequences of endogeneity on the OLS estimators include:
Bias: The OLS estimators will be biased because they no longer capture the true causal effect of education on hypertension. The estimated coefficients will be influenced by the correlation between educ and the error term.
Inefficiency: The OLS estimators will be inefficient, resulting in larger standard errors and reduced precision of the estimates. This inefficiency can lead to wider confidence intervals and decreased statistical power.
Inconsistent estimates: Endogeneity can also result in inconsistent estimators, meaning that as the sample size increases, the estimates will not converge to the true population values. This inconsistency undermines the validity of the estimated effects of education on hypertension.
(b) To evaluate whether a government policy that requires children to complete twelve years of schooling is a good instrumental variable for educ, we need to assess whether the policy meets the criteria for a valid instrument.
Relevance: The instrumental variable (IV) should be correlated with the endogenous variable (educ). In this case, the government policy requiring twelve years of schooling would likely be correlated with education levels as it directly influences the number of years of schooling completed.
Exogeneity: The IV should not be correlated with the error term in the regression equation. It should affect the outcome variable (hypertension) only through its impact on the endogenous variable (educ). This assumption is challenging to test directly but can be supported by theoretical reasoning or prior empirical evidence.
Exclusivity: The IV should affect the outcome variable (hypertension) only through its impact on the endogenous variable (educ) and should not have a direct effect on the outcome variable. This assumption needs to be carefully examined to ensure that the policy does not directly influence hypertension.
If the government policy meets these criteria, then it could be a good instrumental variable for educ. However, the assessment of instrumental variables should be done cautiously, considering the specific context and potential limitations of the instrumental variable approach. It is important to carefully analyze the instrument's validity and conduct sensitivity tests to assess
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If the consumption function is C = 300 +.8(Yd), investment is $200, government spending is $200, t is 0.2, and X = 100 -.04Y then the equilibrium income is: (Hint: Use the equation 1/1-b(1-t) + m a. 6,000 b. 7,500 c. 4,000 d. 2,500 and. 2,000 Consider the previous model, but this time the equation for the investment is 200+ 0.2Y. Then the equilibrium income will be: (hint solve the equation Y = 300+ 0.8((Y - .02Y) +200+ 0.2Y +200 +100 -0.04Y) a. 3,500 b. 2,500 c. 6,500 d. 4,500 and. 4,000
To find the equilibrium income in the given models, we need to equate aggregate output (Y) with aggregate expenditure (AE). Let's solve each model step by step:
Model 1:
Given:
C = 300 + 0.8(Yd)
I = 200
G = 200
T = 0.2
X = 100 - 0.04Y
Aggregate expenditure (AE) is the sum of consumption (C), investment (I), government spending (G), and net exports (X):
AE = C + I + G + X
Substituting the given equations into AE:
AE = (300 + 0.8(Y - T(Y))) + 200 + 200 + (100 - 0.04Y)
Simplifying:
AE = 300 + 0.8Y - 0.8TY + 200 + 200 + 100 - 0.04Y
Combining like terms:
AE = 800 + 0.8Y - 0.8TY - 0.04Y
Equating AE to Y:
Y = AE
To find the equilibrium income, we need to solve for Y using the equation above. However, there seems to be an error in the equation provided for Model 1. It appears to be incomplete or incorrect, as it is missing an essential part of the equation. Could you please provide the complete and accurate equation so that I can help you solve for the equilibrium income?
Model 2:
Given:
C = 300 + 0.8((Y - 0.2Y))
I = 200 + 0.2Y
G = 200
X = 100 - 0.04Y
Substituting the given equations into AE:
AE = (300 + 0.8((Y - 0.2Y))) + (200 + 0.2Y) + 200 + (100 - 0.04Y)
Simplifying:
AE = 300 + 0.8(0.8Y) + 200 + 0.2Y + 200 + 100 - 0.04Y
Combining like terms:
AE = 800 + 0.64Y + 0.2Y + 300 - 0.04Y
AE = 1100 + 0.8Y
Equating AE to Y:
Y = AE
To find the equilibrium income, we need to solve for Y using the equation above. By equating AE to Y, we can set up the equation:
Y = 1100 + 0.8Y
Simplifying:
0.2Y = 1100
Y = 1100 / 0.2
Y = 5500
Therefore, the equilibrium income in Model 2 is $5,500.
Please note that there was an error in the equation provided for Model 1, so I couldn't calculate the equilibrium income for that model.
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At the beginning of 2021, Ehrlich Co. purchased an asset for $1,800,000 with an estimated useful life of 5 years and an estimated salvage value of $150,000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Ehrlich Co.’s tax rate is 20% for 2021 and all future years. Pretax financial statement income is $1,000,000. Instructions: What is the taxable income? Show your calculations. Prepare a journal entry showing the deferred tax liability, income tax expense, and income tax payable. Show all calculations. Prepare the income tax expense section of the balance sheet, beginning with the line "income before income taxes".
Income Tax Payable $132,006. To calculate the taxable income, we need to determine the depreciation expense for tax purposes using the double-declining-balance method. Depreciation expense for tax purposes $720,000
Double-declining-balance depreciation: Determine the straight-line depreciation rate: 1 / useful life = 1 / 5 = 0.2 or 20%.
Double the straight-line rate: 2 * 0.2 = 0.4 or 40%.
Apply the double-declining-balance rate to the asset's book value each year until the salvage value is reached.
Year 1:
Book value at the beginning: $1,800,000
Depreciation expense for tax purposes: $1,800,000 * 40% = $720,000
Year 2:
Book value at the beginning: $1,800,000 - $720,000 = $1,080,000
Depreciation expense for tax purposes: $1,080,000 * 40% = $432,000
Year 3:
Book value at the beginning: $1,080,000 - $432,000 = $648,000
Depreciation expense for tax purposes: $648,000 * 40% = $259,200
Year 4:
Book value at the beginning: $648,000 - $259,200 = $388,800
Depreciation expense for tax purposes: $388,800 * 40% = $155,520
Year 5:
Book value at the beginning: $388,800 - $155,520 = $233,280
Depreciation expense for tax purposes: $233,280 * 40% = $93,312
The taxable income can be calculated by subtracting the tax depreciation expense from the pretax financial statement income:
Taxable income = Pretax financial statement income - Tax depreciation expense
= $1,000,000 - ($720,000 + $432,000 + $259,200 + $155,520 + $93,312)
= $1,000,000 - $1,660,032
= -$660,032
Since the taxable income is negative, it means there is a tax loss. Journal Entry for Deferred Tax Liability, Income Tax Expense, and Income Tax Payable: Income Tax Expense $0 ([$1,000,000 - (-$660,032)] * 20%)
Deferred Tax Liability $132,006 ([-$660,032] * 20%)
Income Tax Payable $132,006
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Comparative financial statement data for Carmono Company follow: This Year Last Year Assets Cash and cash equivalents Accounts receivable Inventory Total current assets Property, plant, and equipment s 13.00 25.00 65.00 107.80 197.80 216.00 40.80 175.20 $373.00 72.00 120.00 205.00 264.00 54.40 209.60 $414.60 Less accumulated depreciation Net property, plant, and equipment Total assets Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings ş 72.00 57.00 124.00 192.00 $373.00 162.00 180.60 $414.60 Total liabilities and stockholders' equity For this year, the company reported net income as follows: $1,400.00 840.00 560.00 Sales Cost of goods sold Gross margin Selling and administrative expenses Net income 540.00 $ 20.00 This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year. Required: 1. Using the indirect method, prepare a statement of cash flows for this year 2. Compute Carmono's free cash flow for this year Complete this question by entering your answers in the tabs below Required 1Required 2 Using the indirect method, prepare a statement of cash flows for this year. (List any deduction in cash and cash outflows as negative amounts. Round your intermediate calculations and final answers to 2 decimal places.) Carmono Company Statement of Cash Flows For This Year Ended December 31 Operating activities 0.00 0.00 Investing activities: 0.00 Financing activities 0.00 0.00 Beginning cash and cash equivalents Ending cash and cash equivalents 0.00 Required 2> < Required 1 Complete this question by entering your answers in the tabs below. 1 Required 2 Required 1 Compute Carmono's free cash flow for this year. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to 2 decimal places.) ree cash flow Required 2> Required 1
1:Using the indirect method, prepare a statement of cash flows for this year For the year ended December 31, 2019, using the indirect method, the statement of cash flows is as follows: Carmono Company Statement of Cash Flows For This Year Ended December 31 .
Operating activities Net income $540 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense$15Increase in accounts receivable$(10) Decrease in inventory$45 Increase in accounts payable$8Decrease in retained earnings$(80)Net cash provided by operating activities$518 Investing activities: Sale of equipment$0Purchase of equipment$(45)Net cash used in investing activities$(45)Financing activities: Issuance of common stock$18Payment of dividends$(58)Net cash used in financing activities$(40)Increase in cash and cash equivalents$433Beginning cash and cash equivalents$72 Ending cash and cash equivalents$505Required 2:Compute Carmono's free cash flow for this year The formula for free cash flow is: Free Cash Flow = Net Cash from Operating Activities - Capital Expenditures Free cash flow for this year is computed as follows: Free Cash Flow = Net Cash from Operating Activities - Capital Expenditures Free Cash Flow = $518 - (-$45)Free Cash Flow = $563
Using the indirect method, prepare a statement of cash flows for this year: Operating activities Net income $540Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense $15Increase in accounts receivable $(10)Decrease in inventory $45 Increase in accounts payable $8Decrease in retained earnings $(80)Net cash provided by operating activities $518 Investing activities: Sale of equipment $0Purchase of equipment $(45)Net cash used in investing activities $(45) Financing activities: Issuance of common stock $18Payment of dividends $(58)Net cash used in financing activities $(40)Increase in cash and cash equivalents $433Beginning cash and cash equivalents $72Ending cash and cash equivalents $505.
1. Using the indirect method, prepare a statement of cash flows for this year For the year ended December 31, 2019, using the indirect method, the statement of cash flows is as follows: Carmono Company Statement of Cash Flows For This Year Ended December 31Operating activities Net income $540Adjustments to reconcile net income to net cash provided by operating activities: Depreciation expense $15Increase in accounts receivable $(10)Decrease in inventory $45Increase in accounts payable $8Decrease in retained earnings $(80)Net cash provided by operating activities $518Investing activities: Sale of equipment $0Purchase of equipment $(45)Net cash used in investing activities $(45)Financing activities: Issuance of common stock $18Payment of dividends $(58)Net cash used in financing activities $(40)Increase in cash and cash equivalents $433Beginning cash and cash equivalents $72Ending cash and cash equivalents $5052. Compute Carmono's free cash flow for this year The formula for free cash flow is: Free Cash Flow = Net Cash from Operating Activities - Capital Expenditures Free cash flow for this year is computed as follows: Free Cash Flow = Net Cash from Operating Activities - Capital Expenditures Free Cash Flow = $518 - (-$45)Free Cash Flow = $563
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Den company acquired the machinery on January 1, 20x1 for $1,000,000. The content of the mechanism is 10 years, and there is no residual value. The depreciation method is a semen method, and the company is applying a re-evaluation model.
(1) 20x1 The fair value at the end of the year is $1,080,000.
(2) At the end of 20x2, there are signs suggesting asset damage, and the impairment differential is recognized, and the fair value and recoverable amount at the end of each accounting period are as follows.
Nine minutes
At the end of 20x2 Fair Value 720,000 Recoverable Value 600,000
At the end of 20x3 Fair Value 750,000 Recoverable Value 682,500
(3) Accounting for the revaluation shall be done by way of eliminating the depreciation amount, and the reassessment surplus shall be replaced by a profit surplus when the asset is removed.
Calculate the reassessment surplus at the end of 20x1.
Calculate the impact on the profit and loss of the Comprehensive Income Statement at the end of 20x2.
Calculate the impact on the comprehensive income statement at the end of 20x3 on the profit and loss.
Den Company acquired machinery on January 1, 20x1, for $1,000,000. The depreciation method applied is a semen method, and the company is applying a re-evaluation model with a content of ten years and no residual value.
At the end of 20x1, the fair value of the machine is $1,080,000. At the end of 20x2, the machine starts showing indications of impairment and the impairment loss is recognized. The fair value and recoverable amount are as follows:
Therefore, the machinery's depreciation expense for 20x1 would be: $1,080,000/10 = $108,000The reassessment surplus is calculated as follows: = Fair value - Net book value = $1,080,000 - ($1,000,000 - $108,000) = $188,000. Therefore, the reassessment surplus at the end of 20x1 is $188,000.2.
The impact on the profit and loss of the Comprehensive Income Statement at the end of 20x2:The difference between the recoverable amount and the carrying value is $600,000 - $720,000 = ($120,000). The machine's carrying value will be reduced by the amount of the loss, resulting in a $120,000 charge against the income statement. The journal entry will be as follows:
Therefore, the reassessment surplus at the end of 20x1 is $188,000, and the impact on the Comprehensive Income Statement's profit and loss for 20x2 and 20x3 is $120,000 and $67,500, respectively.
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Hau Lee Furniture, Inc., spends 45% of its sales dollars in the supply chain and finds its current profit of $25,000 inadequate. The bank is insisting on an improved profit picture prior to approval of a loan for some new equipment. Hau would like to improve the profit line to $30,000 so he can obtain the bank's approval for the loan. Current Situation Sales $100,000 $45,000 (45%) $20,000 (20%) $10,000 (10%) $25,000 (25%) Cost of material Production costs Fixed cost Profit a) What percentage improvement is needed in the supply chain strategy for profit to improve to $30,000? What is the cost of material with a $30,000 profit? A decrease of % in material (supply-chain) costs is required to yield a profit of $30,000, for a new material cost of $ for the percentage decrease to one decimal place and enter your response for the new material cost as a whole number.) (Enter your response b) What percentage improvement is needed in the sales strategy for profit to improve to $30,000? What must sales be for profit to improve to $30,000? % in sales is required to yield a profit of $30,000, for a new new level of sales of $. (Enter your response for the percentage An increase of increase to one decimal place and enter your response for the new sales as a whole number.)
an increase of 20% in sales is required to achieve a profit of $30,000. The new level of sales should be $120,000.
The company's current profit is $25,000, which is insufficient to obtain a loan from the bank. To obtain approval for the loan, Hau wishes to increase the profit to $30,000. Here's the calculation:Profit needed = $30,000Current profit = $25,000Increase in profit = $30,000 - $25,000 = $5,000The current supply chain cost is 45% of sales. So, we have to find out how much percentage decrease in the supply chain cost is required to achieve a $5,000 increase in profit.A $1 decrease in supply chain cost will result in a $1 increase in profit. The supply chain cost that would result in a profit of $30,000 is $45,000 - $5,000 = $40,000.Required percentage decrease = ((45,000 - 40,000) / 45,000) × 100% = 11.11%So, a decrease of 11.11% in material (supply-chain) costs is required to yield a profit of $30,000.b) What percentage improvement is needed in the sales strategy for profit to improve to $30,000? The other way for Hau Lee Furniture, Inc. to achieve its goal of increasing its profit to $30,000 is by increasing its sales.
We can calculate the required percentage increase in sales as follows
:Profit needed = $30,000Current profit = $25,000Increase in profit = $30,000 - $25,000 = $5,000The current contribution of sales to the profit is 25%. That is, 25% of the sales go to profit. Let's assume that the cost of material and production costs remains constant. So, to achieve the desired profit, we need to find out how much the sales revenue should be increased.Required sales revenue = Increase in profit / Contribution to profit percentageRequired sales revenue = $5,000 / 25% = $20,000The current sales revenue is $100,000. Therefore, the required percentage increase in sales revenue can be calculated as follows:Required percentage increase in sales = (Increase in sales revenue / Current sales revenue) × 100%Required percentage increase in sales = ($20,000 / $100,000) × 100% = 20%
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Slocum Brass Company manufactures pumps and valves and uses a time-driven activity-based cost (TDABC) system. Last year, Slocum recorded the following data for assigning manufacturing overhead costs to its products: Requirements (a) Using the company's TDABC system, how much manufacturing (Click the icon to view the data.) overhead cost will be assigned to pumps? How much will be assigned to valves? Slocum also developed the following information on revenues and costs other than manufacturing overhead: (b) What is the company's net income? (Assume the company sells the entire amount of the products it produces.) C Requirement (a) Using the company's TDABC system, how much manufacturing overhead cost will be assigned to pumps? How much will be assigned to valves? The manufacturing overhead cost assigned to pumps will be $ and the manufacturing overhead cost assigned to valves will be $ Requirement (b) What is the company's net income?
In Slocum Brass Company's TDABC system, the manufacturing overhead cost assigned to pumps and valves can be calculated based on the time-driven activity rates .
The respective time consumed by each product in each activity. The specific amounts assigned to pumps and valves will depend on the activity rates and the time required for each product in each activity.To calculate the company's net income, we need to consider the revenues and costs other than manufacturing overhead. Given that the company sells the entire amount of products it produces, we can assume that the revenue is equal to the total sales value of the pumps and valves.
Net income is calculated by subtracting all costs, including manufacturing overhead, from the revenue. This includes direct material costs, direct labor costs, and the assigned manufacturing overhead costs. Once we have these figures, we can calculate the net income by subtracting the total costs from the revenue. It's important to note that the provided data does not include information on direct material and direct labor costs. Without these figures, we cannot accurately determine the net income. Additionally, the information does not provide the activity rates or the time consumed by each product in each activity, which are necessary for calculating the manufacturing overhead costs assigned to pumps and valves using the TDABC system.
To accurately calculate the net income, we would need additional information regarding direct material and labor costs, as well as the necessary data for the TDABC system. With that information, we could calculate the manufacturing overhead costs assigned to pumps and valves and determine the company's net income by considering all relevant costs and revenues.
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a. If the owners' equity is $1,000 and liabilities are $800, what are the assets worth? Assets liabilities + owners' equity I b. If the assets are $1,000 and liabilities are $600, what is the owners' equity? Owners' equity = assets liabilities -
a. The assets are worth $1,800. Given that the owners' equity is $1,000 and liabilities are $800, we can calculate the value of assets.
According to the accounting equation, assets equal liabilities plus owners' equity. Given that the owners' equity is $1,000 and liabilities are $800, we can calculate the value of assets as follows:
Assets = Liabilities + Owners' Equity
Assets = $800 + $1,000
Assets = $1,800
Therefore, the assets are worth $1,800.
b. The owners' equity is $400. Given that the assets are $1,000 and liabilities are $600, we can calculate the owners' equity.
Using the accounting equation, owners' equity equals assets minus liabilities. Given that the assets are $1,000 and liabilities are $600, we can calculate the owners' equity as follows:
Owners' Equity = Assets - Liabilities
Owners' Equity = $1,000 - $600
Owners' Equity = $400
Therefore, the owners' equity is $400.
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Firm X has a marginal abatement cost of $2 per ton of toxic waste and firm Y has a marginal abatement cost of $4 per ton of toxic waste. Is this a cost-effective situation? Yes It depends on how toxic the waste is Yes as long as both firms are abating equal amounts No
No, this is not a cost-effective situation. In a cost-effective situation, firms should undertake abatement activities where the marginal abatement cost is the lowest.
In this case, Firm X has a lower marginal abatement cost of $2 per ton compared to Firm Y's cost of $4 per ton. Therefore, it would be more cost-effective for Firm X to undertake more abatement activities compared to Firm Y.
Yes, this is a cost-effective situation. Firm X has a lower marginal abatement cost ($2 per ton) compared to Firm Y ($4 per ton). In a cost-effective scenario, firms with lower abatement costs should take on a larger share of the abatement efforts to achieve the same level of pollution reduction at a lower overall cost. Therefore, if both firms are abating equal amounts of toxic waste, it indicates that the abatement efforts are allocated efficiently based on their respective marginal abatement costs.
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1. Explain the difference, with examples, between financial objectives and strategic objectives? 2. Explain the difference between the types of alternative strategies and actual strategies themselves.
1. Financial objectives are the objectives of an organization that are specifically focused on monetary returns. These objectives are meant to improve the financial position of a company. Examples of financial objectives include earning a certain amount of revenue, achieving a certain level of profit, or reducing expenses. Strategic objectives, on the other hand, are broader and encompass all aspects of the company.
Strategic objectives are focused on achieving the long-term goals of an organization. Examples of strategic objectives include expanding into new markets, increasing brand awareness, or improving customer service.2. Alternative strategies are different approaches to achieving the same goal. These strategies are often used when a company is faced with multiple options for achieving a particular goal. Examples of alternative strategies include diversification, market penetration, and market development. Actual strategies, on the other hand, are the strategies that a company actually uses to achieve its goals. Actual strategies can be a combination of different alternative strategies, or they can be a completely unique approach. It's important for a company to carefully consider its alternative strategies and choose the best one for achieving its goals. Once a strategy is chosen, it's important to implement it effectively to achieve the desired results.
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A new highway is to be constructed. Design A calls for a concrete pavement costing $90 per foot with a 20-year life; two paved ditches costing $3 per foot each; and three box culverts every mile, each costing $9,000 and having a 20-year life. Annual maintenance will cost $1,800 per mile; the culverts must be cleaned every five years at a cost of $450 each per mile.
Design B calls for a bituminous pavement costing $45 per foot with a 10-year life; two sodded ditches costing $1.50 per footeach; and three pipe culverts every mile, each costing $2,250 and having a 10-year life. The replacement culverts will cost $2,400 each. Annual maintenance will cost $2,700 per mile; the culverts must be cleaned yearly at a cost of $225 each per mile; and the annual ditch maintenance will cost $1.50 per foot per ditch.
Compare the two designs on the basis of equivalent worth per mile for a 20-year period. Find the most economical design on the basis of AW and PW if the MARR is 6% per year.
The AW value for Design A is $ /mi. (Round to the nearest hundreds.)
The PW value for Design A is $ /mi. (Round to the nearest hundreds.)
The AW value for Design B is $ /mi. (Round to the nearest hundreds.)
The PW value for Design B is$ /mi. (Round to the nearest hundreds.)
The most economical design on the basis of AW and PW is
To compare the two designs on the basis of equivalent worth (AW) and present worth (PW) per mile for a 20-year period, we need to calculate the AW and PW values for each design using an MARR (Minimum Acceptable Rate of Return) of 6% per year.
Design A:
Concrete pavement cost: $90 per foot * 1 mile = $90,000
Paved ditches cost: $3 per foot * 2 ditches * 1 mile = $6,000
Box culverts cost: $9,000 * 3 culverts = $27,000
Annual maintenance cost: $1,800 per mile * 20 years = $36,000
Culvert cleaning cost: $450 per cleaning * (20 years / 5) = $1,800
Total AW for Design A = -$90,000 - $6,000 - $27,000 - $36,000 - $1,800 = -$160,800
Total PW for Design A = AW for Design A * PW factor for 6% and 20 years
Design B:
Bituminous pavement cost: $45 per foot * 1 mile = $45,000
Sodded ditches cost: $1.50 per foot * 2 ditches * 1 mile = $3,000
Pipe culverts cost: $2,250 * 3 culverts = $6,750
Replacement culverts cost: $2,400 * 3 culverts = $7,200
Annual maintenance cost: $2,700 per mile * 20 years = $54,000
Culvert cleaning cost: $225 per cleaning * 20 years = $4,500
Ditch maintenance cost: $1.50 per foot * 2 ditches * 1 mile * 20 years = $600
Total AW for Design B = -$45,000 - $3,000 - $6,750 - $7,200 - $54,000 - $4,500 - $600 = -$121,050
Total PW for Design B = AW for Design B * PW factor for 6% and 20 years
Now we can calculate the AW and PW values using the appropriate factors from the interest and annuity table for discrete compounding at 6% for 20 years:
AW for Design A = -$160,800 * 0.2069 = -$33,265 (rounded to the nearest hundreds)
PW for Design A = AW for Design A * PW factor for 6% and 20 years
AW for Design B = -$121,050 * 0.2069 = -$25,057 (rounded to the nearest hundreds)
PW for Design B = AW for Design B * PW factor for 6% and 20 years
The AW value for Design A is -$33,300 per mile.
The PW value for Design A is -$33,300 per mile.
The AW value for Design B is -$25,100 per mile.
The PW value for Design B is -$25,100 per mile.
The most economical design on the basis of AW and PW is Design B as it has a lower negative value, indicating a lower cost over the 20-year period, compared to Design A.
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Explain the Diamond and Dybvig (1983) model and discuss how it
predicts the susceptibility of banks to runs
The Diamond and Dybvig model, proposed in 1983 by Douglas Diamond and Philip Dybvig, is an economic model that explains the possibility of bank runs in a fractional reserve banking system.
The model demonstrates how the inherent vulnerability of banks to runs arises from the maturity mismatch between their assets and liabilities.
In the Diamond and Dybvig model, there are two types of depositors: those who have short-term liquidity needs and those who have longer-term investment needs. The model assumes that depositors are rational and seek to maximize their individual utility. Depositors have the option to either keep their funds in the bank or withdraw them early.
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jose+now+has+$500.+how+much+would+he+have+after+6+years+if+he+leaves+it+invested+at+7.0%+with+annual+compounding?
After 6 years, Jose would have $792.61 if he leaves his $500 invested
at 7.0% with annual compounding.
To calculate this, we can use the formula for compound interest: A = P(1 + r/n)^(nt) A = the final amount P = the principal (starting amount) r = the annual interest rate (as a decimal)
n = the number of times the interest is compounded per year
t = the number of years
To calculate the future value of an investment with annual compounding, we can use the formula:
Future Value = Principal × (1 + Interest Rate)^Number of Years
In this case, the principal is $500, the interest rate is 7.0% or 0.07, and the number of years is 6. Plugging in the values, we get:
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Explain the Fisher equation. Why is it important, or how is it
used? How does an increase in the growth rate of the supply of
money affect the nominal interest rate in the long run?
The Fisher equation relates the nominal interest rate, inflation rate, and real interest rate.
How does the Fisher equation explain the relationship between these variables and why is it important in economics?
The Fisher equation is an essential concept in economics as it helps explain the relationship between nominal interest rates, inflation rates, and real interest rates. It states that the nominal interest rate is equal to the sum of the real interest rate and the expected inflation rate. Mathematically, it is expressed as:
Nominal Interest Rate = Real Interest Rate + Inflation Rate
The Fisher equation is crucial because it highlights the distinction between nominal and real interest rates. The nominal interest rate represents the absolute return on an investment or the cost of borrowing, while the real interest rate adjusts for inflation and reflects the actual purchasing power of money. By accounting for inflation, it allows economists and policymakers to make more accurate assessments of interest rates and their impact on the economy.
An increase in the growth rate of the money supply can affect the nominal interest rate in the long run. According to the Fisher equation, if the money supply grows at a faster rate than the increase in real economic output (GDP), it can lead to higher inflation expectations. In response, lenders will demand a higher nominal interest rate to compensate for the expected loss in purchasing power of the money lent. Therefore, an increase in the growth rate of the money supply can potentially result in higher nominal interest rates to offset the anticipated inflation.
However, it is important to note that the relationship between money supply growth and nominal interest rates is complex and influenced by various factors. In the short run, other factors such as monetary policy actions, economic conditions, and market expectations can also affect nominal interest rates. Additionally, central banks play a critical role in managing the money supply and implementing monetary policies to control inflation and stabilize interest rates.
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Human capital is the economic value of a worker's experience and skills. Use Solow-Swan diagram to show the impact of an increase in human capital on GDP, both in the long-run and in the transition to the long-run. Explain the result.
An increase in human capital leads to higher GDP in the long-run and during the transition.
How does an increase in human capital impact GDP?The Solow-Swan diagram, a neoclassical growth model, helps illustrate the relationship between human capital and GDP. In the long-run, an increase in human capital, which includes factors like education, training, and skills, leads to sustained economic growth and higher GDP. As workers become more skilled and experienced, they contribute more efficiently to the production process, resulting in increased productivity and output.
In the transition to the long-run, the initial increase in human capital leads to temporary growth acceleration as the economy adjusts to the new level of productivity. However, over time, the rate of growth returns to its steady state. This diagram highlights the importance of investing in human capital for long-term economic development and emphasizes the role of skilled workers in driving productivity and GDP growth.
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what are the challenges in a multi-country virtual project
team?
In today’s globalized world, multinational virtual project teams have become a common phenomenon. But, just like any other project, virtual project teams also come with their own set of challenges.
Some of the major challenges in a multi-country virtual project team are discussed below: Communication is one of the major challenges of virtual project teams, especially when the team members are from different countries. This is because of the difference in language, culture, and communication styles. Moreover, the time zone difference between countries may also cause communication challenges.Cultural differencesCultural differences can also be a significant challenge for virtual project teams. Each country has its own cultural norms and values, which influence the way people work and communicate. These cultural differences may result in misunderstandings, miscommunications, and conflict among team members.Time zone differencesTime zone differences are another challenge for virtual project teams. When team members are in different time zones, it can be difficult to schedule meetings or collaborate effectively. This can lead to delays in project completion and poor team performance.Trust and cohesionTrust and cohesion are essential components of any successful team. But, building trust and cohesion in a virtual project team can be challenging. Since team members are not working in the same location, they may feel disconnected and isolated. Moreover, the lack of face-to-face interaction can make it difficult for team members to build rapport and trust with one another.Different work ethics and practicesDifferent countries have different work ethics and practices. This can cause confusion and misunderstandings among virtual project team members. Moreover, differences in work practices may also result in delays in project completion or reduced quality of work. For example, in some countries, it may be acceptable to be late for meetings, while in other countries, punctuality is a must.In conclusion, virtual project teams have become a common practice in the current business environment. Nevertheless, managing a virtual project team comes with its own unique set of challenges, especially when the team is comprised of individuals from different countries. The challenges highlighted above must be taken into account when setting up a virtual project team to ensure that the team is effective and productive.
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Describe sustainability in business, why is it important?
Name three companies and describe their sustainability
policies.
Sustainability in business refers to conducting operations in a way that meets present needs without compromising the ability of future generations to meet their own needs; it is important for long-term viability, environmental stewardship, and social responsibility. Three companies known for their sustainability policies are Tesla, Patagonia, and Unilever.
Which companies have implemented effective sustainability policies?Sustainability is a critical aspect of business because it ensures the responsible use of resources, minimizes negative impacts on the environment, and builds a positive reputation with stakeholders. By integrating sustainable practices into their operations, businesses can mitigate risks associated with climate change, resource scarcity, and regulatory compliance. Companies such as Patagonia, Unilever, and Tesla are exemplary in their sustainability efforts.
Patagonia, an outdoor clothing company, has implemented numerous initiatives to reduce its environmental footprint. They focus on using organic and recycled materials, minimizing waste through repair and recycling programs, and promoting fair labor practices throughout their supply chain.
Unilever, a multinational consumer goods company, has set ambitious sustainability goals through their Sustainable Living Plan. They aim to reduce the environmental impact of their products, improve the livelihoods of farmers, and enhance the health and well-being of their customers.
Tesla, an electric vehicle manufacturer, is at the forefront of sustainable transportation. By producing electric vehicles and renewable energy solutions, they contribute to reducing greenhouse gas emissions and dependence on fossil fuels.
These companies actively integrate sustainability into their business strategies, setting ambitious goals and implementing measures to address environmental and social challenges. By adopting sustainable practices, they aim to create a positive impact and contribute to a more sustainable future.
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