Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

A corporation produces output with a market price of $200 per unit. The marginal product of capital is 1/(2K), where K is units of capital, with each unit assumed to cost $1. (So when we talk about capital in this problem, units and $ value are equivalent.) The life span of the capital is 5 years, implying the straight line depreciation rate δ=.2. The financing cost of capital is ρ=.05.

a. If depreciation and financing costs are not included in accounting costs, what is the optimal level of capital for the firm?
b. If the corporate tax is 35%, what is the optimal level of capital?
c. If depreciation at a rate δ=.2 is included in accounting costs, what is the optimal level of capital? [Hint: remember to find out the present value of the deduction. Use .05 for the discount rate.]
d. For c., what is the effective corporate tax rate?
e. The firm is going to borrow the money for its capital purchases. The interest paid on the debt can be added to accounting costs. Suppose it turns out that the present value of this expense is .10 for every dollar of capital purchased. What is the optimal level of capital now?
f. For e., what is the effective corporate tax rate?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M941225

Have any Question? 


Related Questions in Microeconomics

Assignmentpart idirections read the prompts below and

Assignment PART I Directions: Read the prompts below and formulate a response of at least one half of one page in length for each question. Please show Your references on a reference page 1. Explain records checks. List ...

Assignment 1 -i watch the videos on demand and supplythere

Assignment 1 - I) Watch the videos on Demand and Supply There are 5 changes in Demand that shift the demand curve to the right or left.  They are Change in Tastes and Preferences Change in Income Change in Population Cha ...

Short-run economic fluctuationsplease have by 800 pm west

Short-Run Economic Fluctuations Please have by 8:00 pm west coast time cailfornia time 12/13/2016. Plagrism free, orignal work, and refs. APA format double space. please ask questions right away please dont wait to the l ...

Questionsexercisesseminar 11nbsp discuss what you

Questions/Exercises Seminar 1 1.  Discuss what you understand by the following: a) the law of demand b) the conditions of demand c) a demand curve d) a normal good e) an inferior good f) a Giffen good G) the law of suppl ...

The purpose of an assignment is to ensure that the learner

The purpose of an assignment is to ensure that the Learner is able to: - Use methods of enquiry and research in a disciplined field. - Interpret and evaluate text. - Have a sound understanding of key principles and theor ...

Assignmentselect and review an inspection report posted on

Assignment Select and review an inspection report posted on the OSHA website. The inspection reports can be searched by industry group or establishment name by accessing the reports through the OSHA's Statistics & Data P ...

E8-9 periodic versus perpetual entries fong sai-yuk company

E8-9 (Periodic versus Perpetual Entries) Fong Sai-Yuk Company sells one product. Presented below is information for January for Fong Sai-Yuk Company. Jan 1 Inventory 100 units at $5.00  each Jan 4 Sale 80 units at $8.00  ...

1 a explain in clear language the economic inefficiency

1. a) Explain in clear language the economic inefficiency associated with adverse selection. b) The ACA (aka Obamacare) included an insurance mandate, which forces everyone to purchase insurance or face a penalty. Under ...

Project-listen to this video asafter you work on your graph

Project- Listen to this video as/after you work on your graph. The lecture is on the 'Aftermath of the Financial Crisis' given by Ben Bernanke in March 29 th 2012. https://www.c-span.org/video/?305198-1/ben-bernanke-lect ...

Problem -the table below gives the income of each of four

Problem - The Table below gives the income of each of four individuals who are in a region. Calculate and plot the Lorenz curve and calculate the Gini coefficient for this economy. individual income 1 100 2 200 3 300 4 4 ...

  • 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

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen