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A capital budgeting decision is being considered that would involve an expansion and simultaneous replacement of old equipment. The project is expected to have a 6 year life for the firm. This project will replace some existing equipment which currently has a book value (BV) of $200k and an estimated market salvage value of $375k. The new project will require new equipment costing $2.0 M, which will be depreciated straight-line to a book value of $200k at the end of 6 years. Due to new energy efficient technology, replacing the old equipment with the new more efficient equipment will generate an immediate tax credit of 5% of the equipment's cost. The expansion will require an additional investment in NWC of $200k. Sales are expected to increase by $1000k the first year and grow by 15% in years 2 and 3, then by 5% annually during the remaining 6 year life. Cost of goods sold is forecasted to be 45% of the increased sales, and other selling and general administrative expenses are forecasted to be 10% of the increased sales. It is forecasted that the new equipment will have a salvage value of $300k at the end of the project's 6 year life. The firm's weighted average cost of capital (WACC) for projects of this risk level is 8%. The firm's marginal tax rate is T = 40%. Use the Excel template to complete the capital budgeting analysis. Your Excel analysis should clearly indicate the cash flow analysis timeline and should provide the project's NPV, IRR, PBP, PI, and also illustrate the project's NPV Profile.
A firm (You) has to decide whether or not to enter a market which is serviced by a monopolist. Currently the monopolists earns $6 economic profits, while you earn $0. If you enter the market and the monopolist doesn't engage in a price war.
Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units every hour
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Describe the common allegation that when all firms in an industry are charging the same price, this indicates the absence of competition and the presence of someform of price-setting agreement
Now using the information on input prices also MR, Illustrate what is the optimal input combination.
A farmer determined a natural gas preserve on his property.
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Illustrate what is the short-run market supply curve. Find out the short-run equilibrium cost and quantity in this industry.
Each bundle that the consumer chooses, draw the indifference curve that goes through that bundle.
Would company benefit by advertising in this perfectly competitive market. What would happen to price of toothpaste, would it rise or fall. What would happen to profits company makers.
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