Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $8
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Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
Bank-B is better to invest because it has higher Future value due to higher effective annual interest rate.
Answer:
Jacobs will earn $1,080,000
Explanation:
The earnings of the work factor are made up of two factors: Transfer Earnings + Economic Rents.
Transfer earnings are defined as the minimum required amount that a company must pay its workers to keep them in the workplace. Below this amount, the worker will leave his job. In this case, the Transfer Earnings are $ 80,000, which is the base salary of every designer.
On the other hand, the Economic Rents are the additional income that the worker receives and that is above the minimum level they need to supply his work (In this case, the additional income is given by Jacobs' special ability). In numerical terms, the Economics Rents amount is equivalent to the difference between the earnings obtained by the Jacobs company and the earnings obtained by the other companies.
That is: 1,500,000 - 500,000 = 1,000,000.
Therefore Jacobs salary is equivalent to 80,000 + 1,000,000 = 1,080,000.
From this, it can be deduced that approximately 92% of Jacobs' salary is equivalent to Economic Rents. From the theoretical point of view, this makes sense, because the demand for designers (which is a highly qualified profession) is very inelastic, and the more inelastic the greater the proportion of Economic Rents as part of the salary. In the annexes, I show it graphically.
