Suppose that the market for bike locks is served by a monopolist with marginal cost given by MC = 20. It is also the case that inverse demand for bike locks is given by P = 100 – 0.25Q.

1. (20 points) What are the equilibrium price and quantity?
2. (15 points) What is the monopoly profit?
3. (15 points) What is the deadweight loss associated with monopoly power?

​

​OpenSeas, Inc. is evaluating the purchase of a new cruise ship. The ship will cost

$ 500$500

​million, and will operate for

2020

years. OpenSeas expects annual cash flows from operating the ship to be

$ 70.0$70.0

million and its cost of capital is

12.0 %12.0%.

a. Prepare an NPV profile of the purchase.

b. Identify the IRR on the graph.

c. Should OpenSeas proceed with the​ purchase?

d. How far off could​ OpenSeas' cost of capital estimate be before your purchase decision would​ change?

a. Prepare an NPV profile of the purchase.

To plot the NPV profile we compute the NPV of the project for various discount rates and plot the curve.

The NPV for a discount rate of

2.0 %2.0%

is

​$nothing

million. ​

For the company: Amazon- Articulate how the cost of capital is defined and measured. Define the cost of capital and how it appears to be measured in your selected firm. Present value. Calculate present value using applicable present value tables.

10. a. A commonly used benefit-cost rule is to undertake a program if and only if its ratio of benefits to cost (both in present–value terms) is greater than 1 (B/C > 1). Does this rule make sense?

b. A city is deliberating what to do with a downtown vacant lot that it owns. Should it build a parking garage or a public library? According to its studies, the benefit-cost ratio for the garage is 2 and the ratio for the library is 1.5. Accordingly, the city decides to build the garage. Is this conclusion justified, or is additional information needed? Explain carefully.

c. A state must decide which of its deteriorating bridges to repair within its limited budget. The total number of such bridges (some currently closed for safety reasons) is between 450 and 500. The state has gathered estimates of repair costs and projected traffic benefits for each bridge. It has decided to repair those bridges with the greatest benefit-cost ratios until its budget is exhausted. Does this strategy make sense? Explain carefully.

Transactions of ABC Corporation for the month of January are as follows:

Units    Unit cost

Beginning, Jan. 1 10,000 20

Purchases, Jan. 10 10,000 22

Sold, Jan. 15 15,000

Purchases, Jan. 18 5,000 23

Sold, Jan. 25 8,000

The company uses the perpetual inventory system. Determine the cost of inventory on January 31 and cost of goods sold under:

9.40 A machine now in use that was purchased three years ago at a cost of $4,000 has a book value of $2,000. It can be sold now for $2,500, or it could be used for three more years, at the end of which time it would have no salvage value. The annual O&M costs amount to $10,000 for the machine. If the machine is sold, a new machine can be purchased at an invoice price of $14,000 to replace the present equipment. Freight will amount to $800, and the installation cost will be $200. The new machine has an expected service life of five years and will have no salvage value at the end of that time. With the new machine, the expected direct cash savings amount to $8,000 the first year and $7,000 in O&M for each of the next two years. Corporate income taxes are at an annual rate of 40%, and the net capital gain is taxed at the ordinary income-tax rate. The present machine has been depreciated according to a straight-line method, and the proposed machine would be depreciated on a seven-year MACRS schedule. Consider each of the following questions independently:

1. If the old asset is to be sold now, what would be the amount of its equivalent book value?

2. For depreciation purposes, what would be the first cost of the new machine (depreciation base)?

3. If the old machine is to be sold now, what would be the amount of taxable gains and the gains tax?

4. If the old machine is sold for $5,000 now instead of $2,500, what would be the amount of the gains tax?

5. If the old machine had been depreciated by 175% DB and then by a switch to SL depreciation, what would be the current book value?

6. If the old machine were not replaced by the new one and has been depreciated by the 175% DB method, when would be the time to switch from DB to SL depreciation?

The inventories of Berry Company for the years 2016 and 2017 are as follows:

Berry uses a perpetual inventory system.

Assume Berry uses the direct method.

Assume Berry uses the allowance method.

The inventory records of Frost Company for the years 2016 and 2017 reveal the cost and market of the January 1, 2016, inventory to be $125,000. On December 31, 2016, the cost of inventory was $130,000, while the market value was only $128,000. The December 31, 2017, market value of inventory was $140,000, and the cost was only $135,000. Frost uses a perpetual inventory system.

Assume Frost uses the allowance method and a perpetual inventory system.

Assume Frost uses the direct method and a perpetual inventory system.

In this module, we learned that, despite increases in the cost, the value of higher education has increased over time. How can college be made more affordable? Revenues earned by colleges and universities come from three main sources:

1. Tuition and fees paid by students, which have increased faster than the cost of living.
2. Support from governments at the federal, state, and local levels. This support is paid for through tax revenues. Even private colleges and universities obtain funding from the government, but government support has declined at all levels in recent years.
3. Alumni contributions.

What has caused the cost of college to increase so much? (Not every college has a fancy gym or an Olympic sized pool with a lazy river.) What features of your college education would you be willing to do without to make college more affordable?

What do you propose should be done to make higher education more affordable? What reasons can you provide to support your argument?

(200 words minimum)