(Answered) Considera firm that faces thefollowingexpectedfuture

Management Studies

Consider a firm that faces the following expected future marginal product of capital: MPKf =1000- 2K Where MPKf is the expected future marginal product of capital and K is the capital stock. The price of capital, pk, is 1000, the real interest rate, r, is 10%, and the depreciation rate, d, is 15%.

a. What is the user cost of capital?

b. What is the value of the firm's desired capital stock?

c. Now suppose that the firm must pay a 50% tax on its revenue. What is the value of the desired capital stock?

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Business Management, Management Studies

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