Consider a duopoly where two firms X and Y compete over quantities. They make their output decisions simultaneously. The firms have the same cost function which reads:
TCi = 100+50qi
where TCi are total cost in dollar and qi is the quantity produced by each firm. The total output in the industry is given by Q = qx +qy , the inverse demand function reads:
P(Q) = 350?2Q
1.Calculate the reaction functions of both firms and find the optimal level of output in the Cournot-Nash equilibrium.
2.How much will firm X produce if Y produces 30 units?
3.Illustrate your solution in a suitable graph.
4.If firm 1 chooses quantity first and firm 2 choose quantity after observing firm 1’s choice, find the Stackelberg leader equilibrium.
5.If the two firms collude, find the price and outputs.
In: Economics
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The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 7,000, 7,700, 8,300, and 6,600 units each year for the next four years, respectively. Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $520 can be charged for each zither. Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. |
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PUTZ believes that fixed costs for the project will be $735,000 per year, and variable costs are 20 percent of sales. The equipment necessary for production will cost $3.6 million and qualifies for 100 percent bonus depreciation in the first year. At the end of the project, the equipment can be scrapped for $605,000. Net working capital of $315,000 will be required immediately. PUTZ has a tax rate of 24 percent, and the required return on the project is 12 percent. |
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What is the NPV of the project? |
In: Finance
I need some one to do these questions 100%. Please provide me Correct answers in 1-2 hours. I already lost time due to wrong answers.
1.Calculate the present value of a $1,000 zero-coupon bond with 10 years to maturity if the required annual interest rate is 6.5%.
2.A lottery claims its grand prize is $25 million, payable over 25 years at $1,000,000 per year. If the first payment is made immediately, what is this grand prize really worth? Use a discount rate of 7%.
3.Consider a bond with an 8% semiannual coupon and a face value of $1,000. Complete the following table:
|
Years to Maturity |
Discount Rate |
Current Price |
|
3 |
5 |
|
|
3 |
8 |
|
|
6 |
8 |
|
|
9 |
5 |
|
|
9 |
9 |
What relationship do you observe between yield to maturity and the current market value?
In: Finance
A 2000-pound, couterbalanced, electric forklift can be purchased for $25,000 plus $3000 for the charger and $3000 for a battery. The forklift's market value is 15% less for each of its first 6 years of service. After this period the market value declines at a rate of 7.5% for the next 6 years.
The battery has a life of 12 years and a salvage value of $300. The charger has a 12-year life and a $100 salvage value. The charger's market value declines 20% per year of use. The battery's market value declines by 15% of its purchase price each year. Maintenance of the charger and battery are minimal. The battery will most likely not work with a replacement forklift.
Maintenance of the forklift is $400 per year during Year 1 and 2 while the warranty is in place. In year 3 it jumps to $800 and increases $500 per year thereafter. What is the optimal ownership policy using i =10%?
In: Accounting
BLC offers its customers two lawn maintenance services. One
service is for a one-year maintenance plan at a cost of $180.
Customers can earn a 5% discount from this price if they pay before
BLC’s calendar fiscal year for maintenance services to be performed
in the following year. The second service offered by BLC is a
three-year maintenance plan that sells for $500. The first year’s
maintenance service for this three-year plan will be delivered
before BLC’s fiscal year end. No discount for early payment is
offered for the second plan.
a) Prepare the summary journal entry for the cash sale of 180 one-time plans for the current year, 100 discounted one-time plans for the following year, and 280 three-year maintenance plans.
b) Determine the statement of financial position (SFP)
classification of the unearned portion of the revenue
collected.
| Current portion of the unearned revenue | $ | |
| Non-current portion of the unearned revenue |
In: Accounting
Suppose you short a put option with a strike price of $20 and long another put option with a strike price of $18. Assume the premium for the first option is $1 and the premium for the second option is $0.5. Which of the following is correct?
You wish the stock price stays above $20.
If stock price is at $19.8, you have incurred a loss.
You only have a loss if the stock price goes below $18.
You only have a loss if the stock price is above $20.
In: Finance
Pricing Concepts -Transportation Engineering
A transportation firm is producing a transport service (with quantity Q trips) with the following cost and revenue functions:
Total Cost: TC=$36,000 + $200Q + $0.4Q^2
Total Revenue: TR=$900Q-$0.1Q^2
Set up a table or spreadsheet for trip output/supply (Q), price (P), total revenue (TR), marginal revenue (MR), total cost (TC), marginal cost (MC), average cost (AC), total profit (π), and marginal profit (Mπ). Establish a range for Q from 0 to 1,000 in increments of 100 (i.e., 0, 100, 200, ..., 1,000). Using this spreadsheet, create a graph with AC and MC as dependent variables and trip output/supply (Q) as the independent variable.
a) At what combination of price P and supply Q is profit maximized? Why?
b) At what price P and supply Q is average cost (AC) minimized? Why?
In: Economics
Problem II: The demand curve for product X is given by QD x = 220 − PX + 3PY + 0.001I where PY is the price of a related good Y, and I is income. The supply curve for good X is given by QS X = 10 + 3PX. a) What is the marginal effect of an increase in PY on the equilibrium price of good X? (3/4) b) How much do we need to increase income, if we want people to trade 5 more units of product X?(6666.67) c) Assuming PY = 2 and I = 50, 000, what is the equilibrium price and quantity for good X? (Q=209.5; P=66.5) d) Assuming the same values for PY and I, find the value of PX that would result in a surplus of 100 units. Also find the value of PX that would result in a shortage of 100 units. (91.5 and 41.5)
I need the step by step solutions for each answer. Thank you
In: Economics
Question 2
The total quantity of natural resources to be extracted is 100 units, the rate of return is 5%pa the price now is $20 per unit, the price in 1 year is $30 per unit and the marginal extraction cost for both points in time is the same $10 per unit. How many units should be extracted now? Choose at least one correct answer
1. Approximately 66 units
2. Approximately 100 units
3. Approximately 0 units
4. Approximately 35 units
Question 3
To get the marginal user cost, for Question 2 above, it is simply price less the marginal extraction cost.
1. True
2. False
Question 4
Hotelling rule states that "the value of extracting a quantity of resources now and then earning interest on it such that the value grows to a future point in time" is equal to "the value of extracting a quantity of resource at the same future point in time".
1. True
2. False
In: Economics
Consider the following information and assume that both bonds
pay interest semi-annually, so
that below are semiannual bond equivalent yields.
| A | |
| Coupon | 8 |
| YTM | 8 |
| Maturity | 2 |
| Par | 100 |
| Price | 100 |
1. Calculate the Macaulay duration of bond A.
2. Calculate the modified duration of bond A.
3. Compute the approximate modified duration for bonds A B using the shortcut formula by changing yields by 20 basis points and compare your answers with those calculated in the last question. Hint: calculate the price of the bond when interest rate increase by 20 bsp and decrease by 20 bsp. Then plug in the formula we have in class.
4. Compute the approximate convexity measure for both bonds A (use 10 bsp as the change in interest rate) Hint: calculate the price of the bond when interest rate increase by 10 bsp and decrease by 10 bsp. Then plug in the formula we have in class.
Round to 4 decimal places.
In: Finance