Question
In: Economics
The present price (year 0) of kerosene is $4.30 per gallon, and its cost is expected...
The present price (year 0) of kerosene is $4.30 per gallon, and its cost is expected to increase by 10% per year. (At the end of year 1, kerosene will cost $4.73 per gallon.) Mr. Garcia uses about 800 gallons of kerosene for space heating during a winter season. He has an opportunity to buy a storage tank for $600, and at the end of four years he can sell the storage tank for $100. The tank has a capacity to supply four years of Mr. Garcia's heating needs, so he can buy four years worth of kerosene at its present price ($4.30), or he can invest his money elsewhere at 6%. Should he purchase the storage tank? Assume that kerosene purchased on a pay-as-you-go basis is paid for at the end of the year. (However, kerosene purchased for the storage tank is purchased now).
Hello, I have seen previous answers to the question above. However, I have two concerns as detailed below.
-In part one, since annual equivalent cost is NPV/annuity factor, I think the $100 needs to be converted to an NPV before applying the annuity factor
-In part two, can you clarify why $3,784 is used?
Let me know what you think, thanks.
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Selling price of ZylexB per gallon $ 17.00 Selling price of ZylexA per gallon $ 11.00...
Selling price of ZylexB per gallon
$ 17.00
Selling price of ZylexA per gallon
$ 11.00
Minutes to manufacture a gallon of ZylexA
25
Additional minutes to manufacture a gallon of
ZylexB
10
Cost per gallon of resources for
manufacturing:
ZylexA
Additional Cost - ZylexB
Material
$2.00
$1.75
Labor
2.50
0.50
Variable overhead
2.25
1.10
Both
products have been successful and demand for both products is
strong and beyond the company's capacity. Since it takes additional
time to...
Oil and Gas Prices The average gasoline price per gallon (in cities) and the cost of...
Oil and Gas Prices The average gasoline price
per gallon (in cities) and the cost of a barrel of oil are shown
below for a random selection of weeks in
2015
.
Oil (
$
)
Gasoline (
$
)
55.78
2.654
41.96
2.269
52.08
2.445
57.28
2.710
58.15
2.805
67.59
3.071
The correlation coefficient for the data is
=r0.978
and
=α0.01
. Should regression analysis be done?
The regression
analysis should not be done.
The regression
analysis should be...
Oil and Gas Prices The average gasoline price per gallon (in cities) and the cost of...
Oil and Gas Prices The average gasoline price per gallon (in
cities) and the cost of a barrel of oil are shown below for a
random selection of weeks in 2015. Oil ($) Gasoline ($) 55.78 2.654
41.96 2.269 52.08 2.445 57.28 2.710 58.15 2.805 67.59 3.071
Oil and Gas Prices The average gasoline price per gallon (in cities) and the cost of...
Oil and Gas Prices The average gasoline price
per gallon (in cities) and the cost of a barrel of oil are shown
below for a random selection of weeks from 2015.
Oil
$47.79
$44.62
$81.08
$43.67
$40.58
$48.64
Gasoline
2.638
2.636
2.944
2.528
2.623
2.682
1) The correlation coefficient for the data is r =
0.951 and a = 0.01. Should regression analysis be
done?
a) The regression analysis should not be done or b) The
regression analysis should be...
a. What will happen to the price buyers pay per gallon, the price sellers receive per gallon, and the number of gallons consumed each day?
Suppose the demand for and supply of ethanol in a small town are
as follow:Qd = 9,000 - 1,000PQs = 2,000P - 3,000● Where Q measures gallons per day and P represents price per
gallon. The current equilibrium price $4, and the current
equilibrium quantity is 5,000 gallons per day.● Now suppose that the government wants to create a subsidy of
$0.375 per gallon to encourage the use of ethanol.a. What will happen to the price buyers pay per gallon,...
The market price of milk was $5 per gallon and price elasticity was EP = –...
The market price of milk was $5 per gallon and price elasticity
was EP = – 0.6. The price on milk was reduced from $5 to
$4.25 per gallon.
What will be the percentage change in the demand on milk?
Increased or decreased?
Please describe the meaning and
provide your comments on the given price elasticity.
et the present price (in dollars) of a stock be S(0) = $100 per share. Suppose...
et the present price (in dollars) of a stock be S(0) = $100 per
share. Suppose its price after time T will be either S(T ) = $110
or $90. (i) Suppose that the risk-free return from time 0 to T is
8%. Find the cost of the call option for the stock with strike
price $108 and exercise time T. (ii) Suppose that the risk-free
return from time 0 to T is 5%. Find the cost of the call...
Price (dollars per gallon) Quantity of demand Quantity supplied 1.00 600 0 1.50 500 200 2.00...
Price (dollars per gallon) Quantity of demand Quantity
supplied
1.00 600 0
1.50 500 200
2.00 400 400
2.50 300 600
3.00 200 800
3.50 100 1,000
4.00 0 1,200
4) The table gives the demand and supply schedules for milk in
Cowburg. Assume that the only people who benefit from milk are the
people who consume it and the only people who bear the cost of milk
are the people who produce it. a) Draw the market demand and...
Donny;s Burgers is a price taker. Its costs are Output (Plates per day) Total Cost 0...
Donny;s Burgers is a price taker. Its costs are
Output (Plates per day)
Total Cost
0
0
1
28
2
38
3
51
4
70
5
91
6
130
A) What is Donny's shut-down point?
B) What is the profit maximizing quantity and economic profit if
the price is $21 a dish?
C) We are assuming that the above total cost is the total
variable cost. Now, suppose that we introduce a fixed cost equal to
10. Redo Question 22...
Assume the cost of gasoline is $2.2 per gallon and the cost of electricity is $0.10...
Assume the cost of gasoline is $2.2 per gallon and the cost of
electricity is $0.10 per kWh. Gasoline weighs 5.5 lbs per gallon
and releases 19,000 Btu of energy per pound. a) Calculate the cost
of gasoline and electricity for transportation in terms of dollars
per joule. b) Which one is a more costly energy for transportation?
(hint: more costly means cost more for the same amounts of energy)
c) If gas engines are 25% efficient in energy use...
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