Pearson eText for Fundamentals of Engineering Economics -- Instant Access (Pearson+)
4th Edition
ISBN: 9780137524761
Author: Chan Park
Publisher: PEARSON+
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Question
Chapter 12, Problem 5P
(a):
To determine
Calculate the sunk cost.
(b):
To determine
Calculate the cash flow.
(c):
To determine
Calculate the annual cost.
(d):
To determine
Replacement decision.
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Problem 4
Office Enterprises (OE) produces a line of metal office file cabinets. The company's economist,
having investigated a large number of past data, has established the following equation of demand
for these cabinets:
Q=10,000+6013-100P+50C
Q=Annual number of cabinets sold
B = Index of nonresidential construction
P = Average price per cabinet charged by OE
C=Average price per cabinet charged by OE's closest competitor
It is expected that next year's nonresidential construction index will stand at 160, OE's average
price will be $40, and the competitor's average price will be $35.
1. Forecast next year's sales.
2. What will be the effect if the competitor lowers its price to 832? If it raises its price to $36?
3. What will happen if OE reacts to the decrease mentioned in part b by lowering its price to
$37?
4. If the index forecast was wrong, and it turns out to be only 140 next year, what will be the
effect on OE's sales? If not, what does it measure?
Name:
Problem 1:
Managerial Economics, Assignment 5
April 20, 2025
If the sales of your company have grown from $500,000 five years ago to $1,050,150 this year, what
is the compound growth rate? If you expect your sales to grow at a rate of 10 percent for the next
five years, what should they be five years from now?
1. In this question, assume all dollar units are real dollars in billions. For example, $100 means
$100 billion. Argentina thinks it can find $105 of domestic investment projects with a marginal
product of capital (MPK) equal to 10% (each $1 invested in year 0 pays off $0.10 in every later
year). Assume a world real interest rate r*is 5%, and initial external wealth W (W in year -1)
is 0.
a. You find that the formula on the lecture slide: > r*, which means that a country will
ΔΟ
AK
take on investment projects as long as the marginal product of capital (MPK) is at least as
high as the real interest rate. Using this formula, answer if Argentina should conduct the
project.
b. If the projects are not done, GDP = Q = C = $200 in all years. Compute the present value
of Q and C.
c. If Argentina conducts the projects (investing $105), what is the present value of Q and C?
d. If Argentina conducts the projects, what is the present value of C? Is Argentina better off
with the investment?
Chapter 12 Solutions
Pearson eText for Fundamentals of Engineering Economics -- Instant Access (Pearson+)
Ch. 12 - Prob. 1STCh. 12 - Prob. 2STCh. 12 - Prob. 3STCh. 12 - Prob. 4STCh. 12 - Prob. 5STCh. 12 - Prob. 6STCh. 12 - Prob. 7STCh. 12 - Prob. 8STCh. 12 - Prob. 9STCh. 12 - Prob. 10ST
Ch. 12 - Prob. 1PCh. 12 - Prob. 2PCh. 12 - Prob. 3PCh. 12 - Prob. 4PCh. 12 - Prob. 5PCh. 12 - Prob. 6PCh. 12 - Prob. 7PCh. 12 - Prob. 8PCh. 12 - Prob. 9PCh. 12 - Prob. 10PCh. 12 - Prob. 11PCh. 12 - Prob. 12PCh. 12 - Prob. 13PCh. 12 - Prob. 14PCh. 12 - Prob. 15PCh. 12 - Prob. 16PCh. 12 - Prob. 17PCh. 12 - Prob. 18PCh. 12 - Prob. 19PCh. 12 - Prob. 20PCh. 12 - Prob. 21PCh. 12 - Prob. 22PCh. 12 - Prob. 23PCh. 12 - Prob. 24PCh. 12 - Prob. 25PCh. 12 - Prob. 26PCh. 12 - Prob. 27PCh. 12 - Prob. 28PCh. 12 - Prob. 29PCh. 12 - Prob. 30PCh. 12 - Prob. 31PCh. 12 - Prob. 32PCh. 12 - Prob. 33PCh. 12 - Prob. 34PCh. 12 - Prob. 35PCh. 12 - Prob. 36CSCh. 12 - Prob. 37CS
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