Write down the equation for GDP based on the national spending approach and answer the following questions.

- Does reducing imports increase GDP? Why?

- Does an increase in unemployment benefits increase the government spending component? Why?

- Does the component associated with investment include the purchase of stocks and bonds? Why?

In an examination of holiday spending (known to be normally distributed) of a sample of 16 holiday shoppers at a local mall, an average of $54 was spent per hour of shopping. Based on the current sample, the standard deviation is equal to $21. Find a 90% confidence interval for the population mean level of spending per hour.

1) A decline in the interest rate is likely to have no effect on GDP? Agree or disagree? Why?

2) Households tend to increase their spending during a recession because they realize that more spending will cause firms to hire more workers and the problem of unemployment will be solved.” Do you agree or disagree? Explain.

Research the concepts of government spending, taxation, and borrowing. Be sure to provide details to support your work. What are the sources of federal taxes? What are the areas of government spending? Were you surprised about anything you found in your research? If so why?

Be sure to cite your sources.

Monetary policy refers to Federal Reserve actions to influence the money supply and economic conditions. Fiscal policy is spending and taxing by the government, which can also affect economic conditions. Describe how changes in spending and taxes can affect economic activities. (typing please,thank you.)

Electro Motors (Electro) is considering a new project to produce electric vehicles for the

Australian domestic market and international markets. It has identified a property/plant that was formerly used to build petrol fuelled motor vehicles that could be refitted at minimal cost to manufacture the new electric vehicles. Electro is targeting Australian metropolitan centres for initial sales and expanding into regional centres over the next five years. International demand for electric vehicles is being driven by China and Electro has been in negotiation to provide vehicles to the Chinese market in 2025.

Electro has made the following projections:

• In the first year 2,000 units will be sold and growing at 10% pa.
• The price for each unit in the first year will be AU$50,000. This price will increase by 5% pa.
• Variable costs are 70% of the sales price in the first year’s total revenue and grow by 8% each year.
• Fixed costs are $5 million pa, which are expected to grow by 4% each year.
• The project is for a term of 5 years. The projected growth of the electric cars line is expected to outgrow the plant at this time, hence the plant will be sold at the end of 5 years.
• Initial investment into manufacturing equipment will be $100 million.
• The equipment may be depreciated at 20% straight-line (prime cost) method to zero.
• In 5 years, the plant will be worth 10% of the purchase price.
• Working capital will be $3 million.
• Electro's required rate of return is 10%.
• The tax rate for Electro is 30%.
• Required payback is three (3) years.

Question 1. You have been asked to provide a further evaluation regarding the alternative use of the plant for the purpose of manufacturing electric self-driving cars, however the project life will be for 10 years. Explain how financial managers may evaluate both projects that are of unequal lives. (Only Explain theoretically with illustration whenever possible)

Electro Motors (Electro) is considering a new project to produce electric vehicles for the

Australian domestic market and international markets. It has identified a property/plant that was formerly used to build petrol fuelled motor vehicles that could be refitted at minimal cost to manufacture the new electric vehicles. Electro is targeting Australian metropolitan centres for initial sales and expanding into regional centres over the next five years. International demand for electric vehicles is being driven by China and Electro has been in negotiation to provide vehicles to the Chinese market in 2025.

Electro has made the following projections:

• In the first year 2,000 units will be sold and growing at 10% pa.
• The price for each unit in the first year will be AU$50,000. This price will increase by 5% pa.
• Variable costs are 70% of the sales price in the first year’s total revenue and grow by 8% each year.
• Fixed costs are $5 million pa, which are expected to grow by 4% each year.
• The project is for a term of 5 years. The projected growth of the electric cars line is expected to outgrow the plant at this time, hence the plant will be sold at the end of 5 years.
• Initial investment into manufacturing equipment will be $100 million.
• The equipment may be depreciated at 20% straight-line (prime cost) method to zero.
• In 5 years, the plant will be worth 10% of the purchase price.
• Working capital will be $3 million.
• Electro's required rate of return is 10%.
• The tax rate for Electro is 30%.
• Required payback is three (3) years.

Question 1. You have been asked to provide a further evaluation regarding the alternative use of the plant for the purpose of manufacturing electric self-driving cars, however the project life will be for 10 years. Explain how financial managers may evaluate both projects that are of unequal lives. Also calculate Electro's each year's depreciation until Year 5.

Andrea would like to organize SHO as either an LLC (taxed as a sole proprietorship) or a C corporation. In either form, the entity is expected to generate an 8 percent annual before-tax return on a $800,000 investment. Andrea’s marginal income tax rate is 35 percent and her tax rate on dividends and capital gains is 15 percent. Andrea will also pay a 3.8 percent net investment income tax on dividends and capital gains she recognizes. If Andrea organizes SHO as an LLC, Andrea will be required to pay an additional 2.9 percent for self-employment tax and an additional 0.9 percent for the additional Medicare tax. Further, she is eligible to claim the deduction for qualified business income. Assume that SHO will pay out all of its after-tax earnings every year as a dividend if it is formed as a C corporation.

Problem 4-48 Part a (Algo)

a. How much cash after taxes would Andrea receive from her investment in the first year if SHO is organized as either an LLC or a C corporation? (Round intermediate calculations and your final answers to the nearest whole dollar.)

LLC= ?

C corporation= ?

b. What is the overall tax rate on SHO’s income in the first year if SHO is organized as an LLC or as a C corporation? (Round intermediate calculations to the nearest whole dollar. Round your final answers to 2 decimal places.)

LLC= ___%

C corporation=___%