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Role of economic value and replacement value (This problem requires understanding of the concept of present values)"To me, economic value is the only justifiable basis for measuring plant assets for purpose of evaluating performance. By economic value, I mean the present value of expected future services. Still, we do not even do this on acquisition of new assets- that is, we may compute a positive net present value, using discounted cash flow; but we record the asset at no more than its cost. In this way, the excess present value is not shown in the initial balance sheet. Moreover, the use of replacement costs in subsequent years is also unlikely to result in showing economic values. The replacement cost will probably be less than the economic value at any given instant in an asset's life."Market values are totally unappealing to me because they represent a second-best alternative value- that is, they ordinarily represent the maximum amount obtainable from an alternative that has been rejected. Obviously, if the market value exceeds the economic value of the assets in use, they should be sold. However, in most instances, the opposite is true; market value of individual assets are far below their economic value in use."The obtaining and recording of total present values of individual assets based on discounted-cash-flow techniques is an infeasible alternative. I, therefore, conclude that replacement cost (less accumulated depreciation) of similar assets producing similar services is the best practical approximation of the economic value of the assets in use. Of course, it is more appropriate for the evaluation of the division's performance than the division manager's performance."Critically evaluate these comments. Please do not wander; concentrate on the issues described in the quotation.
What is the likely reason Xtrac persistently underforecasts sales? What are some likely explanations for the reason in part (a)? Propose three likely solutions and critically evaluate each of them.
Show graphically the effect of Canadian strikes on the market for nickel. Given the information above, what's the price elasticity of the world demand for nickel over the relevant price range?
Students find ways around buying the textbook for some classes. For example, some students read the textbooks on reserve at their school's library. How does the number of textbooks available at the school library affect the demand for textbooks?
Define a normal profit and an economic profit. Are normal profits being earned in this example? Are economic profits present for this firm in this example?
Find the revenue maximizing output and price. Calculate the total revenue. Is this outcome on the elastic, inelastic, or unitary elastic part of the demand curve?
If the required rate of return in the stock is 16%, calculate the current value of the stock.
Concept raised in the Dasgupta article in the terms of theoretical microeconomics. Do not try to solve the problem. Simply try to structure the optimization decision.
Explain whether the firm will make economic profit, In the short run and In the long run.
Compute the required rate of return on a stock that has a beta of 2, if the risk-free rate is 4% and the market rate of return is 12 percent.
1.In what way may short term demand management policies help to stabilise the economy? 2.What problems occur in the use of such policies?
1.Think of three examples of monopolies (local or national) and consider how contestable their markets are.
q. what is opportunity cost? explain with the help of an example why assumption of constant opportunity cost is very
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