In Country A, the price of wheat has increased greatly over the past year. Because of this change, farmers in Country A are plan
2 answers:
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Answer:
With specialization Iran will be able to consume 1.7 bottles of olive oil.
Explanation:
Iran produces 4 barrels of oil and 6 bottles of olive oil.
Iraq produces 4 barrels of oil and 4 bottles of olive oil.
The opportunity cost of producing a barrel of oil for Iran
=
= 1.5
The opportunity cost of producing a barrel of oil for Iraq
=
= 1
Iraq has a lower opportunity cost for producing oil so we can say it has a comparative advantage in producing oil.
The opportunity cost of producing a barrel of olive oil for Iran
=
= 0.66
The opportunity cost of producing a barrel of olive oil for Iraq
=
= 1
Iran has a lower opportunity cost for producing olive oil so we can say it has a comparative advantage in producing it.
The terms of trade with specialization are 4 barrels of oil for 4.3 bottles of olive oil, and that 4 barrels of oil are indeed traded for 4.3 bottles of olive oil.
Without trade, Iran is consuming 4 barrels of oil and 6 bottles of olive oil.
With specialization, Iran will be able to consume
= 6 - 4.3
= 1.7 bottles of olive oil
Answer:
a. 7.30%
b. 4.745%
Explanation:
For computing the pretax cost of debt we have to applied the RATE formula i.e to be shown in the attachment below:
Given that,
Present value = $1,000 × 106% = $1,060
Assuming figure - Future value or Face value = $1,000
PMT = 1,000 × 8% ÷ 2 = $40
NPER = 14 years × 2 = 28 years
The formula is shown below:
= Rate(NPER;PMT;-PV;FV;type)
The present value come in negative
So, after applying the above formula
a. The pretax cost of debt is
= 3.65% × 2
= 7.30%
b. And, the after tax cost of debt would be
= Pretax cost of debt × ( 1 - tax rate)
= 7.30 % × ( 1 - 0.35)
= 4.745%
