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Draw a graph like the one in given figure, which shows the effects of transborder pollution. There is no governmental agreement on how to control the pollution, so the German firm is dumping 180 tons of waste into the river. There is free trade in paper, and Austria imports paper. Now Austria imposes a 30 percent tariff on paper imports, which reduces Austrian imports of paper from Germany by 20 percent. As a result of imposing the tariff, Austria suffers standard deadweight losses from the tariff equal to €5 billion. Also as a result of the tariff, Germany produces less paper, and the German firm shown in the graph reduces its dumping of waste by 10 percent.
a. Using your graph, show the effect on Austria of this change in the waste dumping. Calculate the euro value of the effect of the change in waste dumping on Austria's well-being.
b. Overall, including both the standard effect of the tariff (not shown in the graph) and the effect of the change in waste dumping, is Austria better off or worse off (than it was before it imposed the tariff)?
Svenska BK (Swedish bank) enters into a forward contract with a customer to buy Krona (Swedish currency) for $1.25 (US currency) in six months time. After 6 months have gone by the spot exchange rate is now $1.36/Krona. The company asks you (Svenska ..
Cisco has issued an 7%, 20-year bond with a par value of 1000$ that pays interest quarterly. If the yield to maturity 8.5%, what is the price of the bond?
Which of the following statements regarding currency futures contracts and forward contracts is NOT true?
The next dividend payment by Wyatt, Inc., will be $2.90 per share. The dividends are anticipated to maintain a growth rate of 4.75 percent, forever. If the stock currently sells for $49.40 per share, what is the required return?
Assume that an investor acquired a property 5 years ago at a cost of $ 200000. The property was 15 years old at the time of purchase and was financed with a 75% mortgage at 11% interest for 25 years. The investor uses a straight line depreciation wit..
Jackson Central has a 6-year, 8% annual coupon bond with a $1,000 par value. Earls Enterprises has a 12-year, 8% annual coupon bond with a $1,000 par value. Both bonds currently have a yield to maturity of 6%. Which of these two bonds should you buy ..
Tessa owns an unincorporated manufacturing business. In 2015, she purchases and places in service $207,000 of qualifying five-year equipment for use in her business. Her taxable income from the business before any Sec. 179 deduction is $15,000. Tessa..
Pizza has finally narrowed down to two college towns, Collegeville and University City, to open their new location this August, just in time for the fall semester. The Collegeville location requires an initial investment of $126,000, whereas Universi..
NU YU announced today that it will begin paying annual dividends. The first dividend will be paid next year in the amount of $0.37 a share. The following dividends will be $0.42, $0.57, and $0.87 a share annually for the following three years, respec..
Assume that your organization's chief financial officer (CFO) has just completed a presentation to the board of trustees concerning the analysis of a proposed ambulatory surgery center costing $2 million. During the presentation, the CFO indicated th..
Royal Road Company, Inc. wants to increase its debt by selling bonds to $ 900 par value with a coupon interest of 13% to 10 years, in which they will be paying annual interest. To make the sale, a $ 30 bonus will be offered. Costs incurred in this is..
An alumni wants to establish a scholarship that covers the full cost of tuition for one high achiever each year in perpetuity. The university, on the advice of the Finance Department has opted to begin awarding it in 5 years. This year, the estimated..
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