Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 2, Problem 3E
To determine
To calculate: The optimal capital budget.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
A university spent $1.5 million to install solar panels atop a parking garage. These panels will have a capacity of 700 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 10%, that electricity can be purchased at $0.10 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero.
Hint: It may be easier to think of the present value of operating the solar panels for 1 hour per year first.
Approximately how many hours per year will the solar panels need to operate to enable this project to break even?
1,006.80
2,516.99
3,020.39
3,272.09
If the solar panels can operate only for 2,265 hours a year at maximum, the project (would/would not) break even.
Continue to assume that the solar panels can operate only for 2,265 hours a year at maximum.
In order for the project to be worthwhile (i.e., at least break even), the university would need a grant of at least…
Company E has two divisions, Division A and Division B. Division A is currently buying Component X from an external seller for $14. Division B produces Component X and has excess capacity.
Using the following data, what would the transfer price per unit if Division A purchased Component X from Division B at the cost-based transfer price?
Variable cost per unit $6.13
• Fixed cost per unit 1.73
• Division B sales price of Component X 14.50
A university spent $1.6 million to install solar panels atop a parking garage. These panels will have a capacity of 700 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 20%, that electricity can be purchased at $0.30 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero.
Hint: It may be easier to think of the present value of operating the solar panels for 1 hour per year first.
Approximately how many hours per year will the solar panels need to operate to enable this project to break even?
1,564.62
2,503.39
625.85
If the solar panels can operate only for 1,408 hours a year at maximum, the projectwould break even.
Continue to assume that the solar panels can operate only for 1,408 hours a year at maximum.
In order for the project to be worthwhile (i.e., at least break even), the university would need a grant of at least
Chapter 2 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Knowledge Booster
Similar questions
- A university spent $1.4 million to install solar panels atop a parking garage. These panels will have a capacity of 900 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 20%, that electricity can be purchased at $0.20 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero. Hint: It may be easier to think of the present value of operating the solar panels for 1 hour per year first. Approximately how many hours per year will the solar panels need to operate to enable this project to break even? O 1,597.23 O 2,395.85 O 1,437.51 O 1,118.06 If the solar panels can operate only for 1,438 hours a year at maximum, the project break even. Continue to assume that the solar panels can operate only for 1,438 hours a year at maximum. In order for the project to be worthwhile (l.e., at least break even), the university would need a grant of at leastarrow_forwardA university spent $1.4 million to install solar panels atop a parking garage. These panels will have a capacity of 600 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 20%, that electricity can be purchased at $0.20 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero. Hint: It may be easier to think of the present value of operating the solar panels for 1 hour per year first. Approximately how many hours per year will the solar panels need to operate to enable this project to break even? O3,593.73 O2,395.82 O 1,437.49 2,156.24 If the solar panels can operate only for 2,156 hours a year at maximum, the project Continue to assume that the solar panels can operate only for 2,156 hours a year at maximum. break even. In order for the project to be worthwhile (i.e., at least break even), the university would need a grant of at leastarrow_forwardA university spent $1.3 million to install solar panels atop a parking garage. These panels will have a capacity of 70 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 30%, that electricity can be purchased at $0.20 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero. Hint : It may be easier to think of the present valuearrow_forward
- A university spent $1.4 million to install solar panels atop a parking garage. These panels will have a capacity of 200 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 20%, that electricity can be purchased at $0.30 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero. Hint: It may be easier to think of the present value of operating the solar panels for 1 hour per year first. Approximately how many hours per year will the solar panels need to operate to enable this project to break even? 4,791.73 O 6,708.42 3,354.21 5,750.08 If the solar panels can operate only for 4,313 hours a year at maximum,, the project would not Continue to assume that the solar panels can operate only for 4,313 hours à year at maximum. break even In order for the project to be worthwhile (i.e., at least break even), the university would need a grant of at least $223,793.26 $139,870.79 $83,922.47arrow_forwardA university spent $1.8 million to install solar panels atop a parking garage. These panels will have a capacity of 200 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 10%, that electricity can be purchased at $0.30 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero. Hint: It may be easier to think of the present value of operating the solar panels for 1 hour per year first. Approximately how many hours per year will the solar panels need to operate to enable this project to break even? O 4,228.58 O 1,409.53 O 3,523.82 O 5,285.73 If the solar panels can operate only for 3,171 hours a year at maximum, the project would not break even. Continue to assume that the solar panels can operate only for 3,171 hours a year at maximum. In order for the project to be worthwhile (i.e., at least break even), the university would need a grant of at leastarrow_forwardA university spent $1.5 million to install solar panels atop a parking garage. These panels will have a capacity of 200 kilowatts (kW) and have a life expectancy of 20 years. Suppose that the discount rate is 10%, that electricity can be purchased at $0.30 per kilowatt-hour (kWh), and that the marginal cost of electricity production using the solar panels is zero. Hint: It may be easier to think of the present value of operating the solar panels for 1 hour per year first. Approximately how many hours per year will the solar panels need to operate to enable this project to break even? 1,468.26 2,936.51 3,230.16 4,111.11 If the solar panels can operate only for 2,643 hours a year at maximum, the project Continue to assume that the solar panels can operate only for 2,643 hours a year at maximum. break even. In order for the project to be worthwhile (1.e., at least break even), the university would need a grant of at least,arrow_forward
- A drug company is deciding how much to invest in Research and Development into finding a cure stomach cancer. The table below shows the company’s demand for financial capital for R&D of this drug, based on its expected rates of return from selling the drug. Every investment has an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole. Estimated Rate of Return_____________________ Value of R&D Projects That Provide at Least This High a Private Rate of Return to the Drug Company (measured in millions of dollars) 10% $220 9% $228 8% $238 7% $250 6% $264 5% $280 4% $298 3% $308 If the opportunity cost of financial capital for the drug company falls from 7% to 5%, the drug company will invest more in R&D if it receives only the private benefits of this investment. Question 4…arrow_forwardAppalachian Coal Mining believes that it can increase labor productivity and, therefore, net revenue by reducing air pollution in its mines. It estimates that the marginal cost function for reducing pollution by installing additional capital equipment is MC = 40P where P represents a reduction of one unit of pollution in the mines. It also feels that for every unit of pollution reduction, the marginal increase in revenue (MR) is MR = 1,000 - 10P How much pollution reduction should Appalachian Coal Mining undertake?arrow_forwardSport O Rama Equipment Inc., makes two different types of baseball gloves: a regular model and a catcher’s model. The firm has 900 hours of production time available in its cutting and sewing department, 300 hours available in its finishing department, and 100 hours available in its packaging and shipping department. The production time requirements and the profit contribution per glove are given in the following table: MODEL Production time (hrs): Cutting & Sewing Production time (hrs): Finishing Production time (hrs): Packaging & Shipping Profit/Glove ($) REGULAR 1 1/2 1/8 $ 5 CATCHER'S 3/2 1/3 1/4 $ 8 Assume that Sports O Rama Equipment Inc. is interested in maximizing the total profit contribution, answer the following: How many hours of production time will be scheduled in each department? What is the slack time in each department?arrow_forward
- In 2021 one of the world's largest pharmaceutical companies has had sales of $81.8 billion and a pre-tax profit of $22.5 billion. Assume the cost function is approximately TC(q) = F + cq, and that half of the company's total costs are fixed costs like R&D, advertising, litigation (legal costs), and management salaries and bonuses. Which of the below is the closest to the best estimate of the deadweight loss using the Cowling and Mueller method? (use all available information when finding a good substitute for the marginal cost in your deadweight loss formula) ○ 3$ billion $5 billion $11 billion $13 billion $17 billion $20 billion $26 billion $30 billionarrow_forwardEconomics List the main sources of economies of scale in the rail industry within the context of transport economics. Then, indicate which arise as a result of returns to scale and which are cost savings.arrow_forwardWith the aid of appropriate diagrams describe what each of the following abatement cost curves are, who is likely to create them, who is more likely to use them and where relevant their advantages and disadvantages against each other: a) Marginal abatement cost curve.b) Expert derived abatement cost curve.c) Model derived abatement cost curve.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial Economics: Applications, Strategies an...EconomicsISBN:9781305506381Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. HarrisPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics: Applications, Strategies an...
Economics
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning