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what will the capital stock be next period if the initial stock is K0=802, investment is...

what will the capital stock be next period if the initial stock is K0=802, investment is I=111, and the depreciation rate is d=.12 round answer to one decimal place.

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Expert Solution

Initial capital stock is K0= 802

Investment I= 111

Initial capital stock K0 is depreciated at rate d=0.12 , so replacement investment = d*K0 = 0.12*802=96.24

Net investment in the next period = Investment-replacement investment= 111-96.24= 14.76

Let capital stock in next period be K1.

Net investment or increase in productive capital stock= K1-K0

14.76=K1-802

14.76+802=K1

816.76=K1

Capital stock in next period is 816.8

Rahul Sunny answered 2 years ago
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