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mylen [45]
3 years ago
11

Suppose you have $100 of endowment, and you are offered a chance to buy a lottery which costs $36. The lottery has 25% of chance

to win a prize of $G, or you just lose and get nothing. Suppose your utility function on wealth is . What is the least prize size G that you will be willing to buy the lottery
Business
1 answer:
Sphinxa [80]3 years ago
3 0

Answer:

The least prize size G that I will be willing to buy the lottery is 192

Explanation:

First, Calculate the expected utility

Expected utility = \sqrt{100} = 10

There are two cases

Case 1

I win = 100 - 36 + G = 64 + G

Case 2

I lose = 100 - 36 = 64

Hence the expected utility can be calculated as follow

Expected utility = Chance to win x \sqrt{( 64 + G )} + Chance to lose x \sqrt{64}

10 = 25% x \sqrt{( 64 + G )} + ( 100% - 25% ) x \sqrt{64}

10 = 25% x \sqrt{( 64 + G )} + 75% x 8

10 = 25% x \sqrt{( 64 + G )} + 6

10 - 6 = 25% x \sqrt{( 64 + G )}

4 = 25% x \sqrt{( 64 + G )}

4 / 25% = \sqrt{( 64 + G )}

16 = \sqrt{( 64 + G )}

16^{2} = (\sqrt{( 64 + G )})^{2}

256 = 64 + G

G = 256 - 64

G = 192

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mestny [16]

The newly polished one as there will be less resistance and will travel faster across it

8 0
3 years ago
A company is considering two capital investments. Each requires an initial investment of $15,000 and has a 4 year useful life. I
yaroslaw [1]

Answer:

3 years

Explanation:

The computation of the payback period is shown below:

Payback period = Initial investment ÷ Net cash flow

where,  

Initial investment is $15,000

And, the net cash flow would be

= Year 1 + year 2 + year 3 + year 4

= $5,000 + $5,000 + $5,000 + $5,000

= $20,000

As we see that the net cash flow is recovered in three years that means net cash flows and the initial investment are equal

So,

Payback period would be

= $15,000 ÷ $15,000

= 3 years

7 0
3 years ago
Vaughn Manufacturing can sell all the units it can produce of either Plain or Fancy but not both. Plain has a unit contribution
Annette [7]

Answer:

Vaughn should produce Plain as it makes greater profit.

Explanation:

Vaughn Manufacturing can sell all the units it can produce of either Plain or Fancy but not both.

Plain has a unit contribution margin of $86 and takes two machine hours to make and Fancy has a unit contribution margin of $111 and takes three machine hours to make.

There are 2400 machine hours available to manufacture a product.

Profit per machine hour for Plain

= \frac{86}{2}

= $43

Profit per machine hour for Fancy

= \frac{111}{3}

= $37

The difference in profit

= $43 - $37

= $6

Plain makes $6 more profit per machine hour than Fancy.

7 0
3 years ago
Sewtfi861 Corporation makes an extra large part to use in one its fabulous products. A total of 16,000 units of this extra large
LenKa [72]

Answer:

The annual financial disadvantage is $62,560

Explanation:

<u>Analysis of the Costs of Producing Internally and Buying from External Supplier.</u>

                                                    Producing Internally       External Supplier

Direct materials                                      $3.50                                  $0

Direct labor                                             $8.10                                   $0

Variable manufacturing overhead        $8.60                                  $0

Supervisor's salary                                 $4.00                                  $0

Depreciation of special equipment       $2.40                                  $0

Allocated general overhead                  $7.60                               $7.60

Extra contribution                                     $0                                  ($2.19)

Purchases Cost                                        $0                                   $32.70

Product Cost                                          $34.20                              $38.11

<u>Conclusion :</u>

We can see that the Product Cost to produce the part internally costs $3.91 less than the cost to purchase from external supplier. Therefore Sewtfi861 Corp has a disadvantage.

Annual disadvantage =  16,000 units × $3.91

                                    =  $62,560

6 0
3 years ago
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Anika [276]

Answer:

Content.

Explanation:

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The model of online marketing suggests 7C's of internet branding.

The one that is exemplified in the given instance is content.

Content is one of the 7C's of online marketing which helps to pace with the modernity of society. There are, now, many new ways of creating a creative content which helps to attract the customers. This may include to create content that consists of videos, infographics, images, etc.

<u>In the given instance, Maddie is viewing the website of her favorite clothing store. The pictures posted on that website helps Maddie to style her own clothing. This suggests that her favorite clothing store has created a creative content that helps it's customer to visualize the clothings as well.</u>

Thus the correct answer is content.

3 0
3 years ago
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