Ask Question, Ask an Expert

+61-413 786 465

info@mywordsolution.com

Ask Microeconomics Expert

Alice rents bikes on Orcus Island. In her current operation with 20 bikes Alice can generate $16,000 in after tax net revenue each year. Alice is considering expanding her operation to renting 40 bikes which will generate $35,000 in annual revenue and will have operating (production) costs of $12,000. Alice also has to pay a 10 percent tax to the government. She can finance the purchase of 20 additional bikes, which cost $400 each, by borrowing $8000 at a 5 percent annual real interest rate. Suppose that the additional 20 bikes can always be resold for the original purchase price of $400.

1. Determine Alice’s net revenue.

2. Determine Alice’s tax liability.

3. Decide Alice’s after tax net revenue.

4. Determine Alice’s financial benefit associated with the investment expenditure.

5. Determine Alice’s financial cost associated with the investment expenditure.

6. Must Alice undertake the investment? Explain.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91227402

Have any Question?


Related Questions in Microeconomics

Question in spite of the greater emphasis on a planned

Question: In spite of the greater emphasis on a planned economy in France than in Germany, the growth rate in France has averaged more than 1% higher than Germany over the past five years, whereas during the previous fiv ...

Question - please recall one example from your life where

Question - Please recall one example from your life where you bought a product that you did not really need and you regretted after the purchase. What motivated you to buy the product? Why did you regret? Your discussion ...

Quesiton suppose the dollar is overvalued by 20 and the

Quesiton: Suppose the dollar is overvalued by 20% and the Secretary of the Treasury announces that he hopes it will soon return to equilibrium. How would this announcement affect your sales if you were in the following b ...

Question many retirement funds charge an administrative fee

Question: Many retirement funds charge an administrative fee each year equal to 0.25% on managed assets. Suppose that Alexx and Spenser each invest $5,000 in the same stock this year. Alexx invests directly and earns 5% ...

Question the market demand for stuffed rabbits is q 2600 -

Question: The market demand for stuffed rabbits is Q = 2,600 - 20P, and the government intends to place a $4 per bunny tax on stuffed rabbit purchases (tax collected from sellers). Calculate the tax incidence and deadwei ...

Question a there are some status goods like rolex watches

Question: A. There are some "status goods," like Rolex watches, that people want to own because they are expensive. In contradiction to the law of demand, if Rolex watches were less expensive, few "status-seeking" consum ...

Question there are a handful of employee-owned firms in the

Question: There are a handful of employee-owned firms in the United States. In them, committees of workers make decisions that professional managers would normally make (e.g., which markets to enter, how to price product ...

Question use the internet to research the economic crisis

Question: Use the Internet to research the economic crisis that struck Argentina in recent years. Identify as many potential contributing factors to the crisis as you can. What are current conditions of Argentina's excha ...

Question an economy has the production function y a k03

Question: An economy has the production function Y = A (K^0.3) (L^0.7) where A = 1 and (L^0.7) = 10. The depreciation rate is 10% and the investment rate is 30% of output. a. Compute the steady state level of capital. b. ...

Question what is mediation in the collective bargaining

Question: What is Mediation in the Collective Bargaining Process? What are the advantages of mediation? How does Mediation differ from Interest Arbitration? The response must be typed, single spaced, must be in times new ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Why might a bank avoid the use of interest rate swaps even

Why might a bank avoid the use of interest rate swaps, even when the institution is exposed to significant interest rate

Describe the difference between zero coupon bonds and

Describe the difference between zero coupon bonds and coupon bonds. Under what conditions will a coupon bond sell at a p

Compute the present value of an annuity of 880 per year

Compute the present value of an annuity of $ 880 per year for 16 years, given a discount rate of 6 percent per annum. As

Compute the present value of an 1150 payment made in ten

Compute the present value of an $1,150 payment made in ten years when the discount rate is 12 percent. (Do not round int

Compute the present value of an annuity of 699 per year

Compute the present value of an annuity of $ 699 per year for 19 years, given a discount rate of 6 percent per annum. As