Answer:
Whereas the SRAS curve is upward sloping, the LRAS curve is vertical because, given sufficient time, all costs adjust.
Explanation:
Answer:
Missing word <em>"2. What is the total sunk cost regarding the decision to buy the model 200 machine rather than the model 300 machine? 3. What is the total opportunity cost regarding the decision to invest in the model 200 machine?"</em>
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1. Differential cost of buying model 200 machine = Cost of model 200 machine - Cost of model 300 machine
= $342,000 - $373,650
= -$31,650
We'll have a savings of $31,650 if model 200 is purchased rather than model 300
2. $383,000 (The Cost of existing machine). Note: $383,000 is a sunk cost since it has already been incurred.
3. Opportunity cost is the total return of the project if the money was invested elsewhere. The Opportunity cost of investing in model 200 machine is $445,600 (Returns from the alternate project)
Answer:
Present value of sales price = 465,395.16
Present Value of future cash flow= 465,359.16
Explanation:
The present value of a sum expected in the future is the worth today given an opportunity cost interest rate. In another words ,it is amount receivable today that would make the investor to be indifferent between the amount receivable today and the future sum.
The present value of a lump sum can be worked out as follows:
PV = FV × (1+r)^(-n)
Present Value of sales price= 3.1 × 1.11^(-6) =1.65739
Present Value=165,738.65
Present Value of an annuity of 110,000 for 6 years:
PV = A × 1- ( (1+r)^(-n))/r
PV = 110,000× (1-1.11^(-6))/0.11= 465,359.16
PV = 465,359.16
