Economics Questions

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bnr2011

Economics

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Hello everyone, I have 6 questions that I need a good tutor to solve.

1,2 and 3 you just need to rephrase them. but, 4,5 and 6 there are changes in the numbers in my paper.


The Pictures attached are what I want you to take the answers from.


Thanks

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Scanned with CamScanner 17 18 19 20 21 22 23 24 25 26 27 28 29 30 $206,282 $20,628.2 $216,596 $21,659.6 $227,426 $22,742.6 $238,797 $23,879.7 $250,737 $25,073.7 $263,273 $26,327.3 $276,437 $27,643.7 $290,259 $29,025.9 $304,772 $30,477.2 $320,011 $32,001.1 $336,011 $33,601.1 $352,812 $35,281.2 $370,452 $37,045.2 $388,975 $38,897.5 Total by end of 30 years of investment $21,217.5 $22,278.4 $23,392.3 $24,562.0 $25,790.1 $27,079.6 $28,433.5 $29,855.2 $31,348.0 $32,915.4 $34,561.1 $36,289.2 $38,103.7 $40,008.8 $645,785.6 %%% %%%%%%% 8 $8,400 = 60,000(1 + i)10 FW(i)y = -$500(1 + 0.1)3 + $150(1 + 0.1)2 + $150(1 + 0.1)1 + $150 + $100(1 + 0.15)2 + $100(1 + 0.15) + 0 0.14 = (1 + i)10 Log(0.14) = log((1 + i)10) FWy = -$665.5+ $181.5 + $165 + $150 + $132.3 + $115 i = -1.8215 FWy = $78.3 $78 To find car worth at the end of year seven, I'll use F = A [(1+0)*2) %% 6%%%%%%%% %%%%%%%%%%%%%%% ((1 - 1.8215) - 1) F, = $60,000 -1.8215 6. Joe's starting salary as a mechanical engineer is around 90,000. Joe is planning to place a total of 10% of his salary each year in the mutual fund. Joe expects a 5% salary increase each year for the next 30 years of employment. If the mutual fund will average 8% annual rate of return over the course of his career what can Joe expect at retirement. Solution: Fy $24,622 So the car worth at the end of year seven is about $24,622. Assume no tax deduction from his income, 5% salary increment annually is happening, and 8% investment returns is happening after each year. Then at the end of 30 years the total will be about $645,786. The table below show what been described: %%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%% 5. Consider the independent investment projects in the following table: Compute the project worth of each project at the end of six years with variable MARR as follows: 10% for n - 0 ton 3 and 15% for n-4 to n-6 n 0 1 Project Cash Flows n Project X Project Y 0 -800 -500 1 150 150 150 150 350 150 4 -200 100 5 500 100 400 Project X Solution: 2 3 4 5 6 Salary increment $90,000 $94,500 $99,225 $104,186 $109,396 $114,865 $120,609 $126,639 $132,971 $139,620 $146,601 $153,931 $161,627 $169,708 $178,194 $187,104 $196,459 10% of salary at year end $9,000.0 $9,450.0 $9,922.5 $10,418.6 $10,939.6 $11,486.5 $12,060.9 $12,663.9 $13,297.1 $13,962.0 $14,660.1 $15,393.1 $16,162.7 $16,970.8 $17,819.4 $18,710.4 $19,645.9 7 8 9 10 11 12 13 14 15 16 Mutual fund 8% $- $9,720.0 $10,206.0 $10,716.3 $11,252.1 $11,814.7 $12,405.5 $13,025.7 $13,677.0 $14,360.9 $15,078.9 $15,832.9 $16,624.5 $17,455.7 $18,328.5 $19,244.9 $20,207.2 FW (l)x = -$800(1 + 0.1)3 + $150(1 + 0.1)2 + %150(1 + 0.1)1 + $350 + (-$200(1 + 0.15)2 + $500(1 + 0.15)1 + $400 FW = $1,064.8 + $181.5 + $198 + $350 - $264.5 + $575 + $400 FWx = $342.2 - $ 342 Project Y Solution: 6 7 3. Using Excel, identify all positive rates of return for each project n 0 1 They are the three widely used in statement report to quickly assess the profitability of the operation. The gross margin is presenting earnings and company profitability at the most fundamental level. If gross margin is high, then producing is good and have an option to take advantage of this money in other operations. If it's low, then the company needs to monitor. It offers a more specific look at how well a company is managing the resources that contribute directly to the production of its saleable goods and services. Operating margin in the other hand is presenting company profit before tax deduction and stockholder interest. It represents how the company is controlling cost and expenses associated with the operation. It's used by investors and analysts most of the time. The net profit margin is a sign of how effective a company is at cost control. The higher number, the more revenue converting to actual profit and that after deducting all expenses and left with net revenue. It is also for comparison with other companies in the same field and present the industry and structure are doing well. А -2500 100 100 100 2100 Net Cash Flow B -2000 800 600 500 700 с -10000 5600 4900 -3500 7000 D -2500 - 1360 4675 2288 2 3 4 - 1400 5 6 7 2100 900 Solution: Excel Built in function is =IRR (Values, (guess]), which returns the internal rate of return for a series of cash flows. The cash flows must occur at regular intervals, but do not have to be the same amounts for each interval. IRR results are approximated (Excel file attached) n С D 0 1 2 A -2,500 100 100 100 2,100 0 B -2,000 800 600 500 700 -2,500 -1,360 4,675 2,288 0 0 3 -10,000 5,600 4,900 -3,500 7,000 -1,400 2100 900 19% 4 0 5 6 0 0 0 7 IRR 0 -1% 0 12% 0 35% %%% %%%%%%%%%%%%%%%%%%%%%% 4. John paid $60,000 for his brand new Mercedes Benz, ten years later he sold it to his brother for $8,400. What was his average rate of depreciation and what was the car worth at the end of year seven? Solution: F = P(1 + i)" 4 5 1 1 X1 = -1.473 = & X2 = 0.8484 = 1 + i1 1 + 12 during any particular period, unless has an obligation to meet any increased production that will certainly increase and count as manufacturing overhead. i1 -167% (Not economic Significance because it's < -100%) So iz – 18% (Acceptable) %%%%%%%%%%%%%%%%%%%%% 6%%%% 6%%% For Nonmanufacturing costs, there are two additional costs to support any manufacturing operation. First, marketing and selling costs; that include all significant costs to secure consumer orders, finish the product, and deliver it. Second are administrator costs. By breaking down these data costs, it easy to monitor all over costs. For example, overhead which is any similar items associated with the company's selling and administrative functions. In marketing, any costs include all executive, organizational, and clerical costs associated with sales activities. In administrative functions, the executive compensation, general accounting, public relations, and secretarial support, associated with the general management of an organization. 2. Chapter 8 Terms: a. Define and give types of Manufacturing Cost, Nonmanufacturing Cost, and Opportunity Cost. b. Defined how Differential Cost and Differential Revenue are involved in choosing among alternatives c. What is the difference between Gross Margin, Operating Margin, and Net Profit Maryin? Solution a: For opportunity cost, is defined as a benefit that could receive by taking an alternative action. In fact, all opportunities are under a cost. This type of cost arises when a project uses resources that may already have been paid for by the firm for a project. For example, selling an asset already has and not in use. Renting or leasing asset out, replace a source with a source. Solution b: Cost in engineering economics is used in many different ways. Because of the varieties of costs for each one classified differently according to the immediate needs of management, and classification definition of cost. It can be helpful to understand cost in business organization because of their basic activities from acquiring raw materials, produce and finish goods, marketing, etc. Then evaluate these costs to make an early estimates of a product's cost component enables developers to manage resources wisely and evaluate the products economic viability. For manufacturing costs, there are several types illustrated in the process of purchasing and containing materials, manufacturing, finishing, and sell it to consumers. Most manufacturing companies divide manufacturing cost into three broad categories: • Direct raw materials: are any materials used in the final product stage and can easily trace to it. This final stage can be a start state in another manufacture company and count as a raw material. This cycle keeps going until delivered to customers. • Direct labor: Like direct raw materials costs go into the production of a product which is in assembly-line workers. • Manufacturing overhead: Includes all manufacturing costs except the cost of direct materials and direct labor. In other words, the costs of indirect materials like repair and maintenance on production equipment and tools. In fact, it is not easy to trace to a specific unit of output. In addition, many manufacturing overhead costs do not vary as output changes, as long as the production volume stays within the capacity of the plant. For example, depreciation of factory buildings is unaffected by the amount of production There are still decisions involve choosing among alternatives. Each alternative in business decisions has a cost and is beneficial to be compared with costs and benefits of other available alternatives. These differences are called differential cost. In engineering applications, it's cost-volume relationships and useful in making a short term operational decisions. Deferential revenue is in between revenues differences. For example, if there are a differential costs between the proposed method has a lower cost and a current method has a higher cost, then adopting a new method is better decision. This is known as method changes. Other examples, in manufacturing environments it's better to add another 8 hours operation shift then adds 8 hours overtime operation shift when volume demand is high. When its low volume, it's better to shut down manufacture temporarily until operations become normal. This is called operational planning. Other decisions called Make- or-buy which involves hiring others to do certain things instead of buying and operating it. These examples are explaining how deferential cost and revenue are playing an important role in decisions. Solution c: 2 3
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Explanation & Answer

See the attached solution below and excel for question 3...Let me know if you need any editing or clarification

Solutions
Question 1
In order to calculate the rate of return, we will determine the internal rate of return (IRR) using the
information given.
Project 1
IRR is the rate at which the present value of cash inflows = initial cost
8,250(1+R) -3 – 5000 = 0
8,250(1+R) -3 = 5000
(1+R) -3 = 5000/8,250
(1+R) 3= 8250/5000
(1+R) 3 = 1.65
1 + R = 3√1.65 = 1.1817
R = 1.1817 – 1 = 0.1817 = 18.17%
Project 2
2,500(1+R) -1+ 4,000(1+R) -2 – 5000 = 0
2,500(1+R) -1+ 4,000(1+R) -2 = 5,000 or
Use IRR formula to estimate the rate of return. We will assume a lower rate of 12% and a higher
rate of 20%.
IRR formula is given as follows

IRR = rx +

NPVx
(rx − ry )
NPVx − NPVy

x is the lower rate (12%) and y is the higher rate (20%)
NPV when r = 12%
= 2500 (1 + 0.12)-1 + 4000(1+0.12)-2 – 5000 = $420.92
NPV when r = 20%
= 2500 (1 + 0.20)-1 + 4000(1+0.20)-2 – 5000 = -$138.89

IRR = 12% +

420.92
(20% − 12%) = 18.0%
420.92 − (−138.89)

Rate of return = 18.0%

Question 2
a) There are various types of costs incurred by a firm. These costs include the manufacturing
cost, non-manufacturing costs and opportunity costs. Manufacturing costs are costs which
are directly incurred by a firm in the manufacturing process; ...


Anonymous
I was struggling with this subject, and this helped me a ton!

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