The way economists would probably explain the wastage of
this clam resource is by saying that clams are free goods and are therefore
subject to the tragedy of the commons effect. The tragedy of the commons effect
is a theory in economics, postulated by the Victorian economist William Forster
Lloyd.
The tragedy of the commons effect describes a condition
within a shared-resource system where each user act freely according to their
own self-interest, but their collective actions ends in the depletion or spoilage
of that resource, thus having a negative impact on the common good of all users.
In this case, commons is taken to refer to the clam resources.
1) They are young and not so smart o( just a saying), 2) They think they will be rich forever and forever be on top of the world, 3) Ignorance or following the wrong financial advice, 4) Instead of them wisely taking care of their finances, they put it in other people's hands, who of course abuse it as well or take advantage. :)
Answer:
Net Present Value = $59,632.78
Explanation:
<em>The net present value NPV) of a project is the present value of cash inflow less the present value of cash outflow of the project.
</em>
<em>NPV = PV of cash inflow - PV of cash outflow
</em>
Present value of cash inflow:
65,000 × (1.09375)^(-1) + 98000
×(1.09375)^(-2)+ 126,000
×(1.09375)^(-3)+ 132,000 × (1.09375)^(-4)= 326882.7792
PV of annual maintenance cost :
=1,500 × (1- 1.09375^(-4))/0.09375
=4819.84773
NPV = 26882.7792 - 4819.84773
- (255,000+12250)
= 59,632.78
