7. M. Smith can invest capital in $100 increments and has three alternative uses for the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
7. M. Smith can invest capital in $100 increments and has three alternative uses for the capital, as shown in the following table. The values in the table are the marginal value products for each successive $100 of capital invested. Capital invested First $100 Second $100 Third $100 Fourth $100 Firth $100 Sixth $100 Fertilizer Seed Chemicals $400 $250 $350 300 200 300 250 150 250 150 105 200 100 90 150 40 60 90 a. If M. Smith has an unlimited amount of capital available and no other alternative uses for it, how much should be allocated to each alternative? b. If M. Smith can borrow all the capital needed for 1 year at 10 percent interest, how much should be borrowed and how should it be used? c. Assume that M. Smith has only $700 available. How should this limited amount of capital be allocated among the three uses? Does your answer satisfy the equal marginal principle? d. Assume that M. Smith has only $1,200 available. How should this amount be allocated? What is the total income from using the $1,200 this way? Would a different allocation increase the total income? 7. M. Smith can invest capital in $100 increments and has three alternative uses for the capital, as shown in the following table. The values in the table are the marginal value products for each successive $100 of capital invested. Capital invested First $100 Second $100 Third $100 Fourth $100 Firth $100 Sixth $100 Fertilizer Seed Chemicals $400 $250 $350 300 200 300 250 150 250 150 105 200 100 90 150 40 60 90 a. If M. Smith has an unlimited amount of capital available and no other alternative uses for it, how much should be allocated to each alternative? b. If M. Smith can borrow all the capital needed for 1 year at 10 percent interest, how much should be borrowed and how should it be used? c. Assume that M. Smith has only $700 available. How should this limited amount of capital be allocated among the three uses? Does your answer satisfy the equal marginal principle? d. Assume that M. Smith has only $1,200 available. How should this amount be allocated? What is the total income from using the $1,200 this way? Would a different allocation increase the total income?
Expert Answer:
Related Book For
Financial management theory and practice
ISBN: 978-1439078099
13th edition
Authors: Eugene F. Brigham and Michael C. Ehrhardt
Posted Date:
Students also viewed these accounting questions
-
"internet radios" for streaming audio, and personal video recorders and players. Describe design and evaluation processes that could be used by a start-up company to improve the usability of such...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Using the displacement formulation given in Section 9.3.2, use standard separation of variables to solve the torsion problem of a rectangular section shown in Fig. 9.12. Verify your solution with...
-
A company has an EPS of $2.00, a book value per share of $20, and a market/book ratio of 1.2. What is its P/E ratio?
-
Solve the equation. log x 25 = -2
-
What performance measure would you consider most important for McDonald's? For Chevrolet?
-
A Del Hardware has four employees who are paid on an hourly basis plus time-and-a half for all hours worked in excess of 40 a week. Payroll data for the week ended March 15, 2010, are presentd below....
-
6. MAC =9 The use of energy is one of the major causes of pollution and greenhouse gases that lead to climate change. It is desirable to reduce the emissions from energy use. Suppose there are two...
-
The Northern Command oversees which aspect of National Security? defending the continental United States and coordinating with Canada and Mexico defending US interests in Europe, especially in...
-
The quantity theory of money and theories of money demand have a number of implications for monetary policy. a. Countries with high inflation can reduce inflation by controlling money growth. b....
-
Economy A and Economy B are similar in every way except that in Economy A, 50 percent of aggregate expenditure is sensitive to changes in the real interest rate and in Economy B, 70 percent of...
-
Tachi Yamada, formerly of the Bill & Melinda Gates Foundation, stated the following: A second key lesson was from a doctor named Marcel Tuchman. He was the most compassionate person I have ever met...
-
Explain why monetary policymakers actions in cutting the target range for the federal funds rate to 0 to 14 percent were not sufficient to boost economic activity during the recession of 20072009.
-
In the wake of the financial crisis of 20072009, would you expect the banklending channel to have become more or less important in the United States? Explain your answer.
-
Describe about the Securities and Exchange Commission (SEC) Reporting and answer the following questions? Provide complete but concise answers to the following: 1. Based on Managements Discussion and...
-
You are interested in investing and are considering a portfolio comprised of the following two stocks. Their estimated returns under varying market conditions are provided: (note: it is difficult to...
-
The Perez Company has the opportunity to invest in one of two mutually exclusive machines that will produce a product it will need for the foreseeable future. Machine A costs $10 million but realizes...
-
The Thompson Corporation projects an increase in sales from $1.5 million to $2 million, but it needs an additional $300,000 of current assets to support this expansion. Thompson can finance the...
-
Sam Strother and Shawna Tibbs are vice presidents of Mutual of Seattle Insurance Company and co-directors of the company's pension fund management division. An important new client, the North-Western...
-
We can make a static measurement to deduce the spring constant to use in the model. If a \(61 \mathrm{~kg}\) woman stands on a low wall with her full weight on the ball of one foot and the heel free...
-
A \(1.00 \mathrm{~kg}\) block is attached to a horizontal spring with spring INT constant \(2500 \mathrm{~N} / \mathrm{m}\). The block is at rest on a frictionless surface. A \(10.0 \mathrm{~g}\)...
-
If, during a stride, the stretch causes her center of mass to lower by \(10 \mathrm{~mm}\), what is the stored energy? A. \(3.0 \mathrm{~J}\) B. \(6.0 \mathrm{~J}\) C. \(9.0 \mathrm{~J}\) D. \(12...
Study smarter with the SolutionInn App