Answer the 5th question plus 1 more from questions 1–4. Then reply to 1 classmate’s thread.
- A firm is considering 2 capital investment projects. Project A involves an initial cost of $125,000. The discounted present value of all future cash flows is $145,000. Project B requires an initial expenditure of $85,000. The discounted present value of all future cash flows is $102,000.
- Calculate the net present value of each of the 2 projects. Which would be preferred according to the net present value criterion?
- Calculate the profitability index of each of the 2 projects. Which would be preferred according to the profitability index criterion?
- (a) Are lower airline fares at midweek an example of third-degree price discrimination? (b) Under what conditions would it not be useful to charge different prices in different markets (i.e., practive third-degree price discrimination) if even possible?
- Why is it likely that in a system of private education (i.e., a system in which individuals pay for their own education without government subsidy) there will be underinvestment in education (consider the social benefits in addition to individual benefits of education)?
- Why does an exporter face a foreign exchange risk? How can the exporter hedge its foreign exchange risk?
- Do you think the interest on payday loans is too high or just right? Should Christians charge poor people interest on loans?
- “Now in case a countryman of yours becomes poor and his means with regard to you falter, then you are to sustain him, like a stranger or a sojourner, that he may live with you. Do not take usurious interest from him, but revere your God, that your countryman may live with you. You shall not give him your silver at interest, nor your food for gain” (Leviticus 25:35–37, NIV).
- Search the internet for “Microloans” or “Microcredit” and review the interest charged on these loans.
- Course Textbooks:
Froeb, L. M., McCann, B. T., Ward, M. R., & Shor, M. (2016). Managerial economics: A problem solving approach (4th ed.). Boston, MA: Cengage Learning. ISBN: 9781305259331.
Salvatore, D. (2015). Managerial economics in a global economy (8th ed.). New York, NY: Oxford University Press. ISBN: 9780199397129.