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problem1. Use concepts of marginal cost and marginal revenue to derive an optimal capital budget for Company X, which has identified seven probable investment projects and determined its cost of capital as given below.

Table: Alternative Projects, Required Investments, and Expected Rate of Return

1887_table of  project.jpg

Table: Cost of Capital by Amount Raised

1742_block of funds.jpg

problem2. Compare the three investments below in terms of their riskiness. What is the best manner to find out the riskiness of the investment given the information you have on them?

Project         Expected Return    Standard Deviation
A                   $100,000                 $25,000
B                   $200,000                 $40,000
C                   $50,000                   $20,000

problem3. Find out the derivatives of each of the subsequent functions, and their points of maximization or minimization if probable.

a. TC = 1500 - 100 Q + 2Q2
b. ATC = 1500/Q - 100 + 2Q
c. MC = -100 +4Q
d. Q = 550 – 0.5 P
e. Profits = -1500 +1200 Q – 4Q2

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M91534

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