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dangina [55]
3 years ago
5

Explain the importance of profit to the economy.

Business
1 answer:
Kay [80]3 years ago
4 0

Answer:

Explanation:

Profit is the surplus revenue after a firm has paid all its costs. ... In a capitalist economy, profit plays an important role in creating incentives for business and entrepreneurs. For an incumbent firm, the reward of higher profit will encourage them to try and cut costs and develop new products

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Cash Flow Equivalences. Southwestern Moving and Storage wants to have enough money to purchase a new tractor-trailer in 5 years
vagabundo [1.1K]

Answer:

They must set aside $65,494.95 at the end of year 4.

Explanation:

Giving the following information:

Southwestern Moving and Storage wants to have enough money to purchase a new tractor-trailer in 5 years for $290,000. If the company sets aside $100,000 in year 2 and $75,000 in year 3.

Interest rate= 9%

<u>We will assume that the money gets set aside at the end of each period.</u>

First, we need to calculate the accumulated money of the first two investments using the following formula:

FV= PV*(1+i)^n

Year 2: FV= 100,000*(1.09)^3= 129,503

Year 3: FV= 75,000*(1.09)^2= 89,107.5

Total= $218,610.5

Difference= 290,000 - 218,610.5= 71,389.5

Final value= 71,389.5

We need to find the present value:

PV= FV/(1+i)^n

PV= 71,389.5/(1.09)= 65,494.95

7 0
3 years ago
The fair rate is 8%. What is 100 per year, forever, worth now?
777dan777 [17]

Answer:

1. $1,250

2. $855.95

3. $3,333.33

4. $92.59

5. $46.32

6. $671.01

Explanation:

1.

$100 per year forever

Constant Cash flow every year forever is actually a perpetuity its present value is

PV of Perpetuity = Cash flow / rate of return

PV of $100 Perpetuity = $100 / 0.08 = $1,250

2.

$100 per year for 15 years

Constant Cash flow every year for specific time period is actually a Annuity  its present value is

PV of annuity = P + P [ ( 1 - ( 1 + r )^-n ) / r ] = $100 + $100 [ ( 1 - ( 1 + 0.08 )^-15 ) / 0.08 ] = $855.95

3.

$100 per year grow at 5% forever

It is a growing perpetuity and its present value will be calculated as follow

Present value of growing perpetuity = Cash flow / Rate of return - growth rate

Present value of growing perpetuity = $100 / 0.08 - 0.05 = $3,333.33

4.

$100 once at the end of this year

Present value = P ( 1 + r)^-n = $100 ( 1 + 0.08 )^-1 = $92.59

5.

$100 once after 10 years

Present value = P ( 1 + r)^-n = $100 ( 1 + 0.08 )^-10 = $46.32

6.

$100 each year for 10 years @ 8%

PV of annuity = P + P [ ( 1 - ( 1 + r )^-n ) / r ] = $100 + $100 [ ( 1 - ( 1 + 0.08 )^-10 ) / 0.08 ] = $671.01

5 0
3 years ago
Read 2 more answers
Which of the following statements about Treasury bonds is the most accurate? Treasury bonds are completely riskless. Treasury bo
WARRIOR [948]

Answer: 1. Treasury bonds are not completely riskless, since their prices will decline when interest rates rise.

2. Walmart

3. Corporate bonds

Explanation:

1. Indeed even though Treasury bonds have a very low risk rating, they are not completely risk-less. They have a very low risk rating because they will always be honoured (US T - bonds that is) and so that eliminates the default risk. However, they are still exposed to maturity risk as well as inflation risk for the most part. This means that as interest rates rise therefore, their prices drop making them just a little but risky.

2. Walmart issued the bonds making them the issuer. The rest of the names are Underwriters.

3. Since the bonds were issued by a Corporation being Walmart, the bonds are Corporate Bonds.

8 0
3 years ago
Assets Liabilities and Net Worth
KiRa [710]

Answer:

The correct answer is $30 billions.

Explanation:

The checkable deposits are given as $140 billions.

The total reserves are $51 billions.

The required reserve rate is 30%.

The required reserves will be

=30% of $140 billions

=0.3 \times 140

=$42 billions

The excess reserves will be

=total reserves-required reserves

=$51-$42

=$9 billions

Maximum expansion by lending will be

=\frac{excess reserves}{required \ reserve\ rate}

=\frac{9}{0.3}

=$30 billions

So, the money supply can be expanded by a maximum amount of $30 billions.

5 0
3 years ago
When the aggregate supply curve is vertical, which of the following is not true? Group of answer choices The economy is producin
Anni [7]

Answer:

The economy is expanding quickly.

Explanation:

Aggregate supply is a measure of the total supply of goods and services made available by the supplier in an economy.

The normal aggregate supply curve is one with a positive slope. That is as price increases there is an increase in aggregate supply, and when price reduces aggregate supply also reduces.

However when aggregate supply curve is vertical, only one level of output is produced no matter the rise or fall of price.

This indicates that the economy is producing at capacity, and any increase in price will not result in increase in output.

It does not mean that the economy is expanding quickly.

8 0
3 years ago
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