The Missing Link Chain-Link Fence Company is trying to determine how many chain-link fabricating machines to buy for its factory. If we define a chainlink fence of some specified length to be equal to one unit of output, the price of a new fabricating machine is 60 units of output, and the price of a one-year-old machine is 51 units of output. These relative prices are expected to be the same in the future. The expected future marginal product of fabricating machines, measured in units of output, is 165-2K, where K is the number of machines in use. There are no taxed of any sort. The real interest rate is 10% per year.
(a) What is the user cost of capital? Specify the units in which your answer is measured.
(b) Determine the number of machines that will allow Missing Link to maximize its profit.
(c) Suppose that Missing Link must pay a tax equal to 40% of its gross revenue. What is the optimal number of machines for the company?
Answers (1)
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “The Missing Link Chain-Link Fence Company is trying to determine how many chain-link fabricating machines to buy for its factory. If we ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
On May 1, Ace Bonding Company purchased inventory costing $2,000 on account with terms 2/10, n/30. On May 18, Ace pays for this inventory and records which of the following using a perpetual inventory system? A. Accounts Payable 2,000 Cash 2,000 B.
Answers (1)
McConnell Corporation has bonds on the market with 23.5 years to maturity, a YTM of 7 percent, a par value of $1,000, and a current price of $1,051. The bonds make semiannual payments. What must the coupon rate be on these bonds?
Answers (1)
The existing balance in Allowance for Doubtful Accounts is considered in computing bad debts expense in the A. direct write-off method. B. percentage of receivables basis. C. percentage of sales basis. D.
Answers (1)
Horton Co. was organized on January 2, 2014, with 500,000 authorized shares of $10 par value common stock. During 2014, Horton had the following capital transactions: January 5-issued 375,000 shares at $14 per share.
Answers (1)
An isocost line is a curve that shows all combinations of labor and capital that are available for a given total cost
Answers (1)
New Questions in Business
Marco is a Latino who lives in Boston, Massachusetts. Over the years, he has noticed that more stores in his community specialize in ethnic products. This has made Boston feel more like home to him.
Answers (1)
Clu, dolf, and elton do business as fertile valley farm. clu's relationship to the firm ends, but it continues to do business. this is dissociation. dissolution. winding up. wrongful.
Answers (1)
True or False. 1. A company that strictly controls expenses is likely to use a low-cost leadership strategy. 2. Differentiation strategies can reduce the bargaining power of large customers. 3.
Answers (1)
The confrontational legal process under which each party presents its version of events is known as the
Answers (1)
For the past 20 years, Perry has been an owner of several Coldwell Banker Real Estate franchises. To increase business Perry spends a great deal of money marketing and advertising his businesses online.
Answers (1)