A compute the company’s net sales for the year
Answer:
If your required return on KacieCo stock is 15 %, the most you would be willing to pay for the stock today if you plan to sell the stock in two years is $26.43
Explanation:
Accoring to the given data we have the following:
D1= $3
D2=$3.50
P2=$28
Ks=15%
Therefore, in order to calculate the most P0 you would be willing to pay for the stock today if you plan to sell the stock in two years, you would have to use the following formula:
P0 = PV of D1 + Pv of D2 + PV of P2
P0 = D1/(1+ks)^1 + D2/(1+Ks)^2 + P2/(1+Ks)^2
P0 = 3/(1+15%) + 3.5/(1+15%)^2 + 28/(1+15%)^2 = $26.43
Answer: B. In the short run, the typical firm increases its output and makes an above normal profit.
Explanation:
I have attached a graph to explain.
Originally the Perfectly Competitive Market is in a long run Equilibrium.
This means that at 5000 units the $20 selling price was as a result of Marginal Revenue being equal to Marginal Cost.
Now a sudden change in Demand has taken the price up which then forces the Marginal Revenue Curve upwards.
This will culminate with the Marginal Revenue Curve now intersecting the Marginal Cost curve at a higher point being point F so that profit can be maximised.
This higher level will thus lead to a higher output than 5000 units at point Q as the firm will increase output.
Notice that at that point the Marginal Revenue is higher than Average Total Cost meaning that an Above normal profit is being made.
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