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Solution :
a). Bundles 
= U ( _____ , 2), lie on the same indifference curve. Suppose missing numbers is x.
So, 
(40 x 5) + (2 x 5) = 50x + (2 x 2)
210 - 4 = 5x
So Alexander has 
apples and 
bananas. The indifference curve though also include bundle.
Therefore, (41.2, 2)
b). 
= 0.4
So Alexander has apples and bananas with this bundle. Alexander would like to give up 
unit apples for a banana.
E S ( elasticity of supply ) = .5 ( supply is inelastic: E S < 1 )
The formula is:
E S = Δ Q / Δ P * P / Q,
where: Δ Q is the change in quantity, Δ P is change in price, P is initial price and Q is initial quantity.
.5 = Δ Q / 25 * 50 / 100,000
Δ Q = .5 * 25 * 100,000 / 5
Δ Q = 25,000
Quantity at the new price: Q ( new ) = 100,000 + 25,000 = 125,000
Answer:
Cost of equity= 8.0%
Explanation:
<em>Cost of equity can be ascertained using the dividend valuation model. The model states that the price of a stock is the present value of future dividends discounted at the required rate of return.</em>
Cost of equity (Ke) =( Do( 1+g)/P ) + g
g - 2.2%, P - 36.72, D - 2.18
Ke = (2.18 ×(1+0.022)) /38.72 + 0.022 ) × 100
= 0.07954 × 100
= 8.0%
Cost of equity = 8.0%
