Answer:
The maximum that Marco is willing to pay to buy ABC Co. today is $23967.0645
Explanation:
The maximum amount that Marco will be willing to pay today will be the present value of the expected cash flows discounted at the required rate of return. Using the discounted cash flows approach also known as DCF approach, we can calculate the present value of the cash flows,
Present Value = CF1 / (1+r) + CF2 / (1+r)^2 + ... + CFn / (1+r)^n
Where,
- CF is the cash flow
- r is the required rate of return
Present value = 5000 / (1+0.12) + 10000 / (1+0.12)^2 + 16200 / (1+0.12)^3
Present value = $23967.0645
The maximum that Marco is willing to pay to buy ABC Co. today is $23967.0645
Answer:
In the real world, pollution is served as an example of market failure. ... According to the diagram, in this case pollution, negative externalities occurs. At the output Qe , equilibrium output is achieved by the firm, at which the marginal private cost equals the price of the firm's output.
Answer:
The effect on net operating income would be an increase of $137,900
Explanation:
Giving the following information:
Selling price $85
Variable expenses per unit $ 35
If Price Paper spends an additional $12,100 on advertising, sales volume should increase by 3,000 units.
To calculate the effect on income, we need to determine the incremental total contribution, and deduct the incremental fixed costs:
Effect on income= 3,000*(85 - 35) - 12,100= $137,900
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Answer:
no, since other things are not held constant, including her income
Explanation:
The law of demand states that price has an inverse relationship with quantity demanded of a good. As price increases the demand reduces, and as price decreases quantity demanded increases.
However this is true when all other factors reman constant.
In the given scenario the price of hamburger has fallen but Hilary buys less of it. This looks like a violation of the law of demand, but her income has changed so the law of demand may not hold here.
All factors do not remain constant.
Hilary's behaviour can be explained by the concept income effect. Where an increase in income leads to the consumer buying more of expensive goods than cheaper ones.
