Assignment 6 Help Save& Exit Submit Check my work A firm\'s current profits are
ID: 1134202 • Letter: A
Question
Assignment 6 Help Save& Exit Submit Check my work A firm's current profits are $550,000. These profits are expected to grow indefinitely at a constant annual rate of 5 percent.If the firm's opportunity cost of funds is 8 percent, determine the value of the firm: Instructions: Enter your responses rounded to two decimal places ed a. The instant before it pays out current profits as dividends. million b. The instant after it pays out current profits as dividends ences $million Prev 1 of 11Next> SAMSUNG 5 6 8 0Explanation / Answer
1. a) The instant before it pays out current profits as dividend.
$19.8 million
Pv = 55000 ( 1.08/ 0.08 - 0.05 )
b) The instant after it pays out current profits as dividend.
$19.25 million
Pv = 55000 ( 1.05/ 0.08 - 0.05 )
2. a) Jaynet's Accounting profit = Revenue- Explicit cost
=(35x6000) - 20000
= $210000- $20000
=$190000
b) Jaynet's Economic profit = Revenue- Explicit cost - Implicit cost(opportunity cost of next best alternative)
= $210000 - $20000 - $105000
=$85000
3. B(q) = 100 +36Q-4Q2
C(q) = 80+12Q
a) Net Benefit= B(Q)- C(Q)
=100 +36Q-4Q2 -( 80+12Q)
= 20+24Q-4Q2 = Net Benefit
b) Net Benefit
when Q=1
=20+24Q-4Q2
=20+24(1)-4(1)2
=40
when Q=5
=20+24Q-4Q2
=20+24(5)-4(5)2
= 40
c) marginal net benefit = marginal benefit- marginal cost
MB= 36-8Q
MC= 12
MNB(Q) = 36-8Q- 12
MNB(Q)= 24- 8Q
d) Q=1
MNB(Q)= 24- 8(1) = 16
Q=5
MNB(Q)= 24- 8(5) = 16
e) Level of Q that maximises the Net Benefits
Using calculus, Differentiate Net benefit equation with respect to Q
Net benefit= 20+24Q-4Q2
d/dq = 24-8Q
Put this equal to 0
24-8Q= 0
Q= 3 level at whic net benefit maximises
f) MNB at Q= 3
MNB(Q)= 24- 8(3) = 0