Answer: b - high wages might be profitable because they raise the efficiency of a firm’s workers
Explanation:
The efficiency wage theory suggests that increasing wages increases labour productivity which can increase profitability of the firm.
High wages increases the retention rate of labour and their productivity.
Answer:
a. $675.33
b. $1,943.03
c. $747.26
d. $4,026.05
Explanation:
a. Future Value
Pv = - $450
Pmt = $ 0
p/yr = 1
n = 6
r = 7 %
Fv = ?
With the above parameter available, the future value, Fv is $675.33
b. Future Value
Pv = - $900
Pmt = $ 0
p/yr = 1
n = 10
r = 8 %
Fv = ?
With the above parameter available, the future value, Fv is $1,943.03
c. Principal Amount
Pv = ?
Pmt = $ 0
p/yr = 1
n = 5
r = 6 %
Fv = $1,000
With the above parameter available, the future value, Pv is $747.26
d. Principal Amount
Pv = ?
Pmt = $ 600
p/yr = 1
n = 10
r = 8 %
Fv = $0
With the above parameter available, the future value, Pv is $4,026.05
Answer:
Yes, a negative free cash flow can be viewed optimistically by some investors depending on what they are looking for.
Explanation:
A negative free cash flow refers to inability of the business to generate enough cash flow.
This could be seen at face value as a disadvantage but an investor will check the books to know why and that will help to make a more informed decision.
Some companies start out acquiring infrastructure, setting up internal structures, human resources and internal workings of the organization years before proper sales that attract consistent cash flow starts to trickle in.
This pre-operating and initial operating expenses does not reflect well on paper thereby giving a negative free cash flow.
An investor would be optimistic about investing in a company of this sort that has put in place the right conduit to generate and sustain massive cash flow in the nearest future.
Answer:
Mrs.Smith should continue to operate the business in the short run but shut down in the long run.
Explanation:
According to the shut down rule, at the profit-maximizing positive level of output, a business in a competitive market should continue to operate in the short-term if the price equals to or is greater than the average variable cost, but should shut down in the long term if the price is less than or equal to total cost. Here,
price = $8.10
avg variable cost = $8.00
avg total cost = $8.25
Mrs.Smith should continue to operate the business in the short run but shut down in the long run.
