A project's profitability index of.85 indicates that: (Hint: Apply the IRR formula: ICO = discounted cash flows with a desired IRR of 8%.) $16,775.
What exactly is a traditional project?
Standard project. a project that will likely experience one or more future positive cash flows after experiencing a negative initial cash flow ( conventional cash inflows)
What is a non-standard project?
It was first used to refer to "non-conventional" projects or "projects having non-conventional cash flows." The internal rate of return (IRR), which was demonstrated to have different values or not exist at all in some projects, was introduced into economic literature after that. If a project just involves one cash change, it is deemed conventional.
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- Shut down, if the minimum possible average variable cost is $5
In the purely competitive market majority of the producers is price taker as there are many sellers of the same homogenous product. When in the situation of Marginal Cost (MC) of product at the current rate of production is equal to the market price. This shows that the firm isn’t in profit, it is selling at which they are producing. So, the Average Variable Cost AVC of product at this level indicates the shutdown of the firm production.
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Answer:
The numbers are missing, so I looked for a similar question (see attached image).
- the expected value for option A (modernize everything) = (0.5 x $90,000) + (0.5 x $25,000) = $57,500
- the expected value for option B (modernize only second floor) = (0.4 x $80,000) + (0.6 x $70,000) = $74,000
- the expected value for option C (do nothing) = (0.3 x $60,000) + (0.7 x $33,000) = $41,100
The option with the highest expected value is option B (modernize only second floor).
Safety and liquidity. Liquidity means the ability to use it at a moments notice and if saved that is possible whereas if invested that may not always be the case. If invested you won’t be able to use the funds immediately or at least you aren’t guaranteed that you can without a delay. The other imp reason is safety. If you save your money it is safe and retains its value but if invested it’s value can fluctuate which you tolerate and expect in the hopes that over time it will earn you more money.
