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Howard Bowen is a large cotton farmer. The land and machinery he owns has a current market value of $4,000,000. Bowen owes his local bank $3,000,000. Last year Bowen sold $5,000,000 worth of cotton. His variable operating costs were $4,500,000 and his depreciation on machinery was $60,000. Interest on the bank loan was $300,000. If Bowen worked for another farmer or a local manufacturer, his annual income would be about $50,000. Bowen can invest at 10% any net funds that would be derived from the sale of the farm (sale price less debt payoff). He projects that his costs and revenue will be similar this year if he continues farming.
a. What is Bowen's accounting profit from farming an additional year?
b. What is Bowen's economic profit from farming an additional year? What should he do? Explain.
a safe firm and a risky firm. Each firm needs to borrow the same amount of funds to start a project. The safe firm knows with certainty that it will see a 30 percent return on the project (i.e., for each $100 borrowed, the safe firm will see rev..
Determine the economic activity that takes place in Underground Economy have any impact upon any Economic Indicator.
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own a bond that pays a semiannual coupon of $100 on Jan. 1 and July 1 of each year until 2020, and will pay $10,000 in addition to the coupon payment on Jan. 1, 2020. Tomorrow (Jan 2, 2012) you receive two pieces of information.
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The Economic Survey estimated the Forex reserves of India at over 297 billion US dollars. The surge in Forex is attributed to growth in which of the following sector Gross Fiscal Deficit stands at 4.8% of GDP. What was the percentage of Gross Fisc..
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