Explain the principle of the cost of production, Diminishing Marginal Productivity , Diminishing Marginal Utility in microeconomics. ( minimum a paragraph for each)

Anderson plans to acquire an automated assembly line with ten year life at a cost of sh 10 million, delivered and installed. He plans to use the equipment for only five years.He can borrow the required 10 million at a before cost of 10%.The estimated scrap value is sh 50,000 after ten years, but its estimated scrap value after five years is sh 1 million.He can lease the equipment for 5 years at a rental charge of sh 2.75m payable at the beginning of each year.The lessor will maintain the equipment. However if he buys he will bear the cost of maintenance of shs500,000 per year payable at the beginning of the year.The marginal tax rate is 40%

Analyze whether the company should purchase or lease the asset(

A monopolist has the following total cost function:

C = 50 + 10Q + 0.5Q²

They face the market demand:

P = 210 – 2Q

a. What is the profit-maximizing price and quantity set by this monopoly? What is this monopolist’s profit?  

b. Calculate the producer surplus, consumer surplus, and deadweight loss.  

c. If the price elasticity of demand (ԑ) faced by this monopolist at the equilibrium is –1.625, what is the Lerner Index?  

d. If the price elasticity of demand (ԑ) faced by this monopolist at the equilibrium is – 4, what is the Lerner Index?  

e. Is the price markup charged by the monopolist higher in the part c scenario or in the part d scenario? Why?  

You are the head of Corporate Investments for Everspring, Corp., which has a cost of capital (discount rate) of 10%. You are deciding on whether to invest your firm’s money in the three projects below. All cash flows for each project are shown; all projects are abandoned after Year 5.

  Project A Project B   Project C
Initial Investment ($100,000) ($500,000)   ($6,500,000)
Year 1 $30,000 ($100,000) $1,000,000
Year 2 $40,000 $200,000 $1,500,000
Year 3 $50,000 $200,000 $2,000,000
Year 4 $60,000 $200,000 $2,500,000
Year 5 $70,000 $200,000 $3,000,000

1. Assume each year’s cash flows occur evenly over the year. If your required payback period is 30 months, in which projects would you invest?

2. Assume each year’s cash flows occur at the end of the year. What is the net present value (NPV) of Project A?

3. Assume each year’s cash flows occur at the end of the year. What is the internal rate of return (IRR) of Project B?

4. Assume each year’s cash flows occur at the end of the year. What is the profitability index (PI) of Project C?

The manufacturing cost of Mocha Industries for three months of the year are provided below: Total Cost Production April $95,966 1,460 Units May 97,184 2,040 Units June 99,116 2,960 Units (a) Using the high-low method, determine the variable cost per unit. Round your answers to two decimal places. $ per unit (b) Using the high-low method, determine total fixed costs. $

Pharoah Legler requires an estimate of the cost of goods lost by fire on March 9. Merchandise on hand on January 1 was $34,200. Purchases since January 1 were $64,800; freight-in, $3,060; purchase returns and allowances, $2,160. Sales are made at 33 1/3% above cost and totaled $99,000 to March 9. Goods costing $9,810 were left undamaged by the fire; remaining goods were destroyed.

Compute the cost of goods destroyed. (Round gross profit percentage and final answer to 0 decimal places, e.g. 15% or 125.)

Compute the cost of goods destroyed, assuming that the gross profit is 33 ¹/₃% of sales. (Round ratios for computational purposes to 5 decimal places, e.g. 78.72345% and final answer to 0 decimal places, e.g. 28,987.)

Man-U-Facturing Inc. will buy a machine that has a cost of $850,000 and is expected to be useful for 10 years. At the end of the 10th year, the firm intends to sell the machine for an estimated price of $52,036. In addition, the yearly benefits are expected to be $201,952 while the annual maintenance costs are predicted to be $51,300. The company uses a 9% interest rate for this project and it is currently being taxed at a flat tax rate of 21%. This time assume that Man-U-Facturing Inc. uses straight-line depreciation. What the is the after-tax net present value (NPV)?

A firm in a perfectly competitive market has the following cost curve: TC = 200 + Q + 2Q^2 and The market demand is: Qd = 121 - P. There are 20 identical firms in the market (N =20) in the short-run.

e) At the equilibrium price found in part (c), how much profit is each firm making in the short-run? Will there be entry or exit in this market in the long-run?

f) What is the price of the product in the long-run?

g) How many firms are there in the market in the long-run?

h) How much profit is each firm making in the long-run

A German car will cost $45,000 and have fuel usage of 21mpg for the first 5 years, and decrease
by 1% thereafter to year 8. Repair cost will start at $1000 in year 1 and increase by 4% per year.
It will have a salvage value of $7000 at the end of year 8. Insurance cost will be $850 the first year,
increasing by 2% per year thereafter.
The American car will cost $35,000 and have fuel usage of 20mpg for the first 3 years, and will
decrease by 3% per year thereafter. Repair cost will be $800 in year 1, increasing by 4% per year
thereafter. Being an American, the graduate will price the pride of owning an American car at $0.4
for every 20 miles driven, increasing by 2% per year. Insurance cost will be $800 per year
increasing by 2.2% per year. The car can be sold for $5500 at the end of year 8.
If the graduate anticipates driving 150000 miles by the end of year 8 and the average interest rate
is expected to remain at 5% per year, which car is economically affordable based on present worth
analysis? Assume fuel cost will be $3 per gallon in year 1 and increase by an average of 2% per
year. Show all your workings.

Wells Printing is considering the purchase of a new printing press. The total installed cost of the press is $2.2 million. This outlay would be partially offset by the sale of an existing press. The old press has zero book value, cost $1 million 10 years ago, and can be sold currently for $1.2 million before taxes. As a result of acquisition of the new press, sales in each of the next 5 years are expected to be $1.6 million higher than with the existing press, but product costs (excluding depreciation) will represent 50% of sales. The new press will not affect the firm’s net working capital requirements. The new press will be depreciated under MACRS, using a 5-year recovery period. The firm is subject to a 40% tax rate. Wells Printing’s cost of capital is 11%. (Note: Assume that the old and the new presses will each have a terminal value of $0 at the end of year 6.) [15 marks]
i. Determine the initial investment required by the new press. [2 marks]
ii. Determine the operating cash flows attributable to the new press. (Note: Be sure to consider the depreciation in year 6.) [6 marks]
iii. Determine the payback period. [2 marks]
iv. Determine the net present value (NPV) and the internal rate of return (IRR) related to the proposed new press. [4 marks]
v. Make a recommendation to accept or reject the new press, and justify your answer. [1 marks]