Question

4.B
Construct an Excel model with solver to solve for the profit maximizing levels of price and quantity for the profit function, Z = qp - cf - qcv, where cf = 8000, cv = 6, and the demand function for the product is q = 2400 - 24p. Illustrate the solution with a graph of the profit function, showing the profit maximizing price level.
For an oligopoly as described in the chapter, construct an Excel model to solve for the profit maximizing price of B2 which is P2 when Firm 2 expects P1 to be 10.

4.C
Use Microsoft Excel to answer the following questions.
A. Calculate the value at the end of the tenth year of a one-time payment of 100,000 invested at an annualized return of 16 percent. Returns are compounded annually.
B. Calculate the value at the end of the tenth year of a one-time payment of 100,000 invested at an annualized return of 16 percent. Returns are compounded quarterly.
C. Calculate the value at the end of the fifth year of an annuity paid where 100,000 is paid at the end of each year at an annualized return of 16 percent. Returns are compounded annually.
D. Calculate the present value of 100,000 to be received at the end of 10 years using an annualized discount rate of 16 percent. Returns are compounded annually.
E. Calculate the present value of 100,000 to be received at the end of 10 years using an annualized discount rate of 24 percent. Returns are compounded annually.
F. Calculate the present value of an annuity where 100,000 is received at the end of each of the next five years using a discount rate of 16 percent. Returns are compounded annually.
Construct a Microsoft Excel worksheet to determine whether or not the farmer should make the following investment: A farmer is thinking of purchasing a combine solely to do custom combining for neighboring farms. It is a means of creating an income stream for his son. The combine costs 400,000 and will result in annual cash inflows of 180,000 and annual cash outflows of 40,000. The combine will be used for three years then sold for an estimated salvage value of 166,600. The CCA rate is 30 percent, the farm's marginal tax rate is 25 percent, and the required return (discount rate) for the investment is 12 percent.

Answer 1