Suppose that in year 1, Acme Corporation can make a real (inflation-adjusted) return on an investment of 3 percent. Assume thenominal interest rate is 8 percent and the inflation rate is 4 percent.Instructions: Enter your answer as a whole number.a. Using this information, we can conclude that the investment would not be profitableb. Suppose that in year 2, the real interest rate changes to 7 percent while inflation remains constant at 4 percent.In year 2, the nominal interest rate must bepercent. After graduation, you face a choice. You can work for a multinational consulting firm and earn a starting salary (including benefits) of$45,000, or you can start your own consulting firm using $6,000 of your own savings. If you keep your money in a savings account,you can earn an interest rate of 5 percent. You choose to start your own consulting firm. At the end of the first year, you add up all ofyour expenses and revenues. Your expenses include $14,000 for rent, $1,600 for office supplies, $22,000 for labor, and $4,900 fortelephone expenses. After operating your consulting firm for a year, your total revenues are $102,000.Instructions: Enter your answers as a whole number.a. What is your accounting profit?2$b. What is your economic profit?%24

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Suppose that in year 1, Acme Corporation can make a real (inflation-adjusted) return on an investment of 3 percent. Assume the nominal interest rate is 8 percent and the inflation rate is 4 percent. Instructions: Enter your answer as a whole number. a. Using this information, we can conclude that the investment would not be profitable b. Suppose that in year 2, the real interest rate changes to 7 percent while inflation remains constant at 4 percent. In year 2, the nominal interest rate must be * percent.

Suppose that in year 1, Acme Corporation can make a real (inflation-adjusted) return on an investment of 3 percent. Assume the nominal interest rate is 8 percent and the inflation rate is 4 percent. Instructions: Enter your answer as a whole number. a. Using this information, we can conclude that the investment would not be profitable b. Suppose that in year 2, the real interest rate changes to 7 percent while inflation remains constant at 4 percent. In year 2, the nominal interest rate must be * percent.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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