Q. Assume a basket that costs $100 in the U.S. would cost $120 in the United Kingdom. (18 pts)

a) What is the U.S. real exchange rate, qUS/UK, with the United Kingdom? Intuitively, what does this real exchange rate imply? (5 pts)

b) Does PPP hold true here? Why? (5 pts)

c) Instead, let’s assume that a basket that costs $100 in the U.S. would cost also $100 in the United Kingdom. For the next year, the Fed is predicted to keep U.S. inflation at 2% and the Bank of England is predicted to keep U.K. inflation at 3%. Does PPP hold true here? If so, use relative PPP to predict what will happen to the dollar’s value against the poundin one year’s time. (8 pts)

Describe the normative measurement theories proposed in the 1960s and 1970s as alternatives to historical cost accounting. Discuss the effectiveness of these theories in improving accounting measurement.

1.      Suppose mountain spring water can be produced at no cost and the inverse demand for mountain spring water is P = 1200 – 0.2Q.

a.     Suppose the market of mountain spring water is supplied by two firms (Firm A and firm B) that behave like a Cournot duopoly. Find the Nash Equilibrium price and quantity of production for each firm. (Hint: Marginal revenue for firm A is 1200 - 0.4Qa - 0.2Qb and marginal revenue for firm B is 1200 - 0.2Qa - 0.4Qb.)

b.     Suppose the market of mountain spring water is supplied by two firms (Firm A and firm B) that behave like a Stackelberg duopoly where firm A is the leader and firm B is the follower. Find the Nash Equilibrium price and quantity of production for each firm. (Hint: marginal revenue for firm A is 600 - 0.2Qa)

Please include steps and explanations

Almendarez Corporation is considering the purchase of a machine that would cost $170,000 and would last for 5 years. At the end of 5 years, the machine would have a salvage value of $19,000. By reducing labor and other operating costs, the machine would provide annual cost savings of $41,000. The company requires a minimum pretax return of 11% on all investment projects. (Ignore income taxes.)

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.

The net present value of the proposed project is closest to: (Round your intermediate calculations and final answer to the nearest whole dollar amount.)

Multiple Choice

$(7,197)

$16,117

$(35,000)

$(22,544)

Periodic inventory by three methods; cost of goods sold

The units of an item available for sale during the year were as follows:

There are 40 units of the item in the physical inventory at December 31. The periodic inventory system is used.

Determine the ending inventory cost and the cost of goods sold by three methods. Round interim calculations to one decimal and final answers to the nearest whole dollar.

If the cost of one of the two inputs shown on an isocost-isoquant diagram decreases, what would you expect to happen to the use of these resources change?

A proposed investment has a project life of four years. The necessary equipment will cost of $1,200, and have a useful life of 4 years. The cost will be depreciated straight-line to a zero salvage value, but will have a market worth $500 at the end of the project’s life. Cash sales will be $2,190 per year for four years and cash costs will run $670 per year. Fixed cost is $176 per year. The firm will also need to invest $390 in net working capital. Last year, marketing research for this project cost $1,500. The appropriate discount rate is 5.8%, and the corporate marginal tax rate is 28% while the average tax rate is 34%.

(A.) What are the cash flows from assets (CFFA) for this project?   

(B.) What is the Net Present Value (NPV) of this project?

(C.) What is the Profitability Index (PI) of this project?

(D.) What is the Payback Period for this project?

(E.) What is the Internal Rate of Return (IRR) for this project?

"Consider the following data on an asset Cost of the asset, I = $70,000 Useful life, N = 7 years What is the book value at the end of the useful life if you depreciate according to the double-declining-balance (DDB) method?"

For a monopolist’s output: Demand: P= 90 – 4Q    Cost: TC = 10Q. For the profit maximizing monopolist that charges the same price to all buyers:

Compute P and Q.

Compute the Lerner Index (Price Cost Markup). Use the Lerner Index formula.

Compute price elasticity of demand at the price in answer (a).

Explain the relationship between your answers to b and c.

Compute the deadweight loss from monopoly?

Compute the deadweight loss from monopoly that Gordon Tullock would calculate? Explain.