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- 4. Business cycles might be caused by sectoral reallocations in which technological advancement causes new industries to flourish. Workers can move from old to the new industries, although it does not happen instantenously. These workers spend time away from market work, either for job search or for training/education (to acquire the skills needed to work in the new industry). Suppose that there are two firms, the agricultural low-tech and the manufacturing high-tech firm. The old firm is active in both periods and it pays wage wд in each period. The manufacturing firm pays wage wM and is only active in the second period and WA WM. To work in the manufacturing firm, the consumer should spend some of her time in the first period to be out of the labor market. The consumer chooses (c, c', l, l') to maximize u(c, c') subject to the budget constraints: c+b≤wA (h-1) c≤wa(h-1)+wMl + b(1+r) and a time constraint 0 <1 ≤h. Assume also that the consumer's utility function follows the standard…3. Consider a dynamic (two-period) representative firm's problem. This representative firm is given K unit of capital to produce in the current period. Firm can choose (current-period and future-period) labor demands and investment (to adjust future- period's capital stock) to maximize its present-value lifetime profit. Given that the market interest rate is r and the capital depreciation rate is & after production in each period. Let's further assume that this firm sells all the capital after future-period production. (a) Clearly definite the profit functions for both periods and write down this repre- sentative firm's problem. (b) Write down the optimal condition on investment. Intuitively explain the optimal condition. (c) Suppose K increases, graph the change of investment curve. Intuitively explain the changes on the graph you just drew.KATHY BUYS A TELEVISION SET FROM A MERCHANT WHO ASKS P1,500.00 AT THE END OF 60 DAYS (CASH IN 60 DAYS). KATHY WISHES TO PAY IMMEDIATELY AND THE MERCHANT OFFERS TO COMPUTE THE CASH PRICE ON THE ASSUMPTION THAT MONEY IS WORTH 8% SIMPLE INTEREST. WHAT IS THE CASH PRICE TODAY? O a. P1,480.26 O b. P1,408.26 O c. P1,048.26 O d. P1,840.26
- 2. (+3) For events A, B, and C, state whether each of the following is always true (T) or not always true (F): (a) P(A|B) + P(A|B) = 1 (b) If A and B are independent events then A is independent of B. (c) If P(C) > 0 and P(A) > P(B) then P(A|C) > P(B|C).5. Rearden Metals is considering opening a strip mining operation to provide some of the raw materials needed in producing Rearden metal. The initial purchase of the land and the as- sociated costs of opening up mining operations will cost $100 million today. The mine is expected to generate $30 million worth of ore per year for the next 10 years. In 11 years, when the project is over, Rearden will need to spend $200 million to restore the land to its original pristine natural appearance. Which of the following is FALSE? A) Rearden should only use the NPV rule in this case to determine whether to make this investment. B) Rearden could use either the NPV rule or the IRR rule in this case, and will get the same answer regardless of the cost of capital. C) In this case, the NPV will not necessarily be decreasing in the cost of capital or discount rate used. D) Rearden should not use the payback rule in this example because it is likely to be mis- leading. E) Rearden could make a mistake…A stock currently sells for 13 TL per share and pays 0.18 TL per year in dividends. What is an investor's valuation of this stock if she expects it to be selling for 16 TL in onelyear and requires a 10 % return on equity investments? O a. 14,55% O b. 11.82% Oc 14,71% O d. 14,73%
- 233. Consider a dynamic (two-period) representative firm's problem. This representative firm is given K unit of capital to produce in the current period. Firm can choose (current-period and future-period) labor demands and investment (to adjust future- period's capital stock) to maximize its present-value lifetime profit. Given that the market interest rate is r and the capital depreciation rate is & after production in each period. Let's further assume that this firm sells all the capital after future-period production. (a) Clearly definite the profit functions for both periods and write down this repre- sentative firm's problem. (b) Write down the optimal condition on investment. Intuitively explain the optimal condition. (c) Suppose K increases, graph the change of investment curve. Intuitively explain the changes on the graph you just drew.Help please
- Suppose that SolarHeat Co., a renewable energy startup, currently has earnings of $10 per share and that Eleanor anticipates the earnings per share to grow by 6 percent per year. Using a mean industry PE ratio of 12 and the expected annual growth rate on the firm's existing earnings, the estimated stock price in three years is: $138.63 $142.92 O $147.21 $154.35 Suppose SolarHeat Co. is expected to pay a dividend of $3 per share over the next three years, that Eleanor's required rate of return is 16 percent, and that she plans to sell the stock at the end of the three-year time period. Under these circumstances, using the adjusted dividend discount model, the value of the stock today is: O $88.47 per share $98.30 per share $101.25 per share $105.18 per shareA Company's stock currently pays a dividend of $5 dollars per year and you expect that dividend to grow by 3% every year, forever, such that next year you expect the dividend to be 5.15, to be 5.3045 the year after that, and so on. If your discount rate is 9%, a fair price for this stock today is_____.If your discount rate were to fall to 7%, holding all else the same, the fair price of the stock would increase to_________.Emerging Asia: Capital Flows $ billion Emerging Europe: Capital Flows $ billion 2013 2014 2015 Est. 2016 Proj. 2015 Est. 2016 Proj. 2013 2014 Non-Resident Capital Inflows 676 619 191 350 Non-Resident Capital Inflows Private Inflows 214 38 51 Private Inflows 668 613 185 344 218 31 -20 43 Equity Investment 396 442 378 375 Equity Investment 64 52 17 44 Direct Investment 349 372 364 313 Portfolio Investment Direct Investment 66 59 33 42 47 70 14 62 Portfolio Investment -2 -7 -16 Private Creditors 272 171 -193 -31 Commercial Banks 127 73 -165 -38 Private Creditors 154 -22 -37 -1 Nonbanks 145 99 -29 Commercial Banks 20 32 -14 10 Official Inflows International Financial Institutions Nonbanks 134 -54 -23 -11 3 4 4 Official Inflows -4 17 8 Bilateral Creditors 3. International Financial Institutions -12 14 10 Bilateral Creditors 4 3 -2 Resident Capital Outflows Private Outflows Equity Investment Abroad Resident Lending/Other Reserves (- = Increase) Net Capital Flows incl. Reserves -961 -801 -543…