For the first investment the solution as follows
Annual depreciation
600,000÷6 years=100,000
Net annual cash flows
100,000+155,000=255,000
Present value
255,000×4.11141+16,600×0.50663
=1,056,819.608
Net present value
1,056,819.608−600,000=456,819.608
For the second investment the solution as follows
Annual depreciation
390,000÷8 years=48,750
Net annual cash flows
48,750+60,000=108,750
Present value
108,750×4.96764+24,500×0.40388
=550,125.91
Net present value
550,125.91−390,000=160,125.91
The main disadvantage of the valuation method is that the terminal value tends to dominate the total value in many cases.
In a free cash flow valuation, the intrinsic value equals present value of its free cash flow and thus, the net cash flow is left over for distribution to stockholders and debt-holders in each period.
- So, the disadvantage of the free cash flow valuation method is that the terminal value tends to dominate the total value in many cases.
Hence, the Option B is correct.
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Answer:
average total cost per unit is not at its lowest possible cost
Explanation:
A monopolistic competition is defined as such a market where many different firms or companies sells various differentiated products. Here the firm has some control on the price of the product. It is a market structure of considerably no price competition.
The monopolistic firms are not productive enough because the output is very less than the optimum level of the society as the average total cost of the producer per unit is not at the lowest possible cost.
Explanation:
The computation is shown below:
The consumption is
= 40 cases × $40 per case
= $1,600
The import is also same i.e $1,600 because the purchase from Dutch distributor represents the consumption and imports for the United states economy.
Now the exporter is
= 200 transistors × $ 15
= $3,000
Now the net exports is
= Exports - imports
= $3,000 - $1,600
= $1,400
And, the consumption value is $1,100
The total economy consumption is
= $1,600 + $1,100
= $2,700
Now the GDP is
= Consumption + investment + government spending + net exports
= $2,700 + $0 + $0 + $1,400
= $4,100
