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emmasim [6.3K]
3 years ago
8

In two to four sentences, explain economies of scale.

Business
1 answer:
Svetlanka [38]3 years ago
5 0

The reduction in long-run average and marginal costs arising from an increase in size of an operating unit (a factory or plant, for example). Economics of scale can be internal to an organization (cost reduction due to technological and management factors) or external (cost reduction due to the effect of technology in an industry).



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the nominal interest rate is 7 percent and the expected inflation rate is 4 percent. the real interest rate is
Hoochie [10]

Answer:

2.88%

Explanation:

According to the fisher equation :

(1 + Nominal interest ) = (1 + real interest) (1 + inflation rate)

(1.07) = (1.04) x (1 + real interest)

(1.07) / (1.04) = (1 + real interest)

1.028846

real interest rate = 2.88%

6 0
3 years ago
An investment costs $152,000 and has projected cash inflows of $71,800, $86,900, and −$11,200 for Years 1 to 3, respectively. If
Radda [10]

Answer:

No; The IRR is less than the required return.

Explanation:

Calculation  of IRR is given by the formula: Lr x NPVL / NPVL - NPVH x (Hr - Lr)

where

Lr  = Lower rate of discount

Hr = Higher rate of discount

NPVH = NPV at Higher discount rate

NPVL = NPV at Lower discount rate

Assume a low discount rate of 1% and a high rate of 20%

<u>NPV at 1%</u>

<u>Particulars        Year 0  Year 1    Year 2   Year 3</u>

Cash flows       152,000  71,800  86,900  (11,200)

DCF 1%                 1           0.99    0.98       0.97

Present values (152,000) 71,082 85,162   (10,864)

NPV = $6,620

<u />

<u>NPV at 20%</u>

<u>Particulars        Year 0  Year 1    Year 2   Year 3</u>

Cash flows       152,000  71,800  86,900  (11,200)

DCF 20%                 1           0.83    0.69       0.58

Present values (152,000) 59,594 59,961   (6,496)

NPV = ($38,941)

Substituting values in the IRR formula we have:

1% x [($6,620 / ($6620 - (38,941))] x (20% - 1%) = 2.06%

Therefore we reject the project because it gives an IRR lower than the required rate of return of 15.5%

8 0
3 years ago
Bond Yields and Rates of Return A 30-year, 10% semiannual coupon bond with a par value of $1,000 may be called in 4 years at a c
Nookie1986 [14]

Answer:

The bond's yield to maturity is 9.45% using Excel to get exact values, and 9.59% using approximate method.

Explanation:

We can calculate is using 2 ways, using Excel to get the exact percentage or with approximate methods, calculating the semi-annual Yield to Maturity using the following formula

YTM_{sm} =\cfrac{PMT+\cfrac{FV-PV}n}{\cfrac{FV+PV}2}

And from there we can calculate the Yield to Maturity just by multiplying the semi-annual one by 2.

Identifying the given information.

We have a period of 30 years, so for the semiannual bond we have n=2(30) = 60 periods.

The face value, FV, is $1000, the coupon rate is 0.10, thus we can use them to  find the interest per period PMT.

PMT=0.10 \times \cfrac{1000}{2}\\PMT=\$ 50

The current price of the bond, PV is $1050.

Replacing the values on the semiannual Yield to Maturity

YTM_{sm} =\cfrac{PMT+\cfrac{FV-PV}n}{\cfrac{FV+PV}2}

YTM_{sm}=\cfrac{50+\cfrac{1000-1050}{60}}{\cfrac{1000+1050}{2}}

Simplifying we get

YTM_{sm}=4.797\%\\

Finding the Yield to Maturity.

We can just multiply by 2 to get the Yield to Maturity from our previous result and rounding it to 2 decimals we get

YTM = 2 YTM_{sm}\\YTM=9.59\%

Alternatively we can use Excel and write:

RATE(n, PMT, PV, FV)*2

That is

RATE(60,50,1050,1000)*2

And we will get the exact Yield to maturity 9.49%

3 0
3 years ago
Which of the following is TRUE regarding a dead weight loss.
nikdorinn [45]

Answer:

I'm pretty sure the answer is A

8 0
3 years ago
A certain bank assigns one unique number to each savings account. The amount of savings in each account depends on how much the
fenix001 [56]
A certain bank assigns one unique number to each savings account. The amount of savings in each account depends on how much the owner deposits into the <span>account. The interest paid on each account depends on how much money is in the account. The relation that is not a function is that "</span><span>interest paid, amount in savings account."</span> 
8 0
2 years ago
Read 2 more answers
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