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Your utility function is U = log(2C), where C is the amount of consumption that you have in any given period. Your income is $40,000 per year and there is a 2% chance that you will be involved in a catastrophic accident that will cost you $30,000 next year.
a. What is your expected utility?
b. Calculate an actuarially fair insurance premium. What would your expected utility be were you to purchase the actuarially fair insurance premium?
c. What is the most that you would be willing to pay for insurance, given your utility function?
Cox Corporation reported EBITDA of $22.5 million and $5.4 million of net income. The company has a $6 million interest expense and its corporate tax rate is 35%. What was Cox's depreciation and amortization expense?
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Trevi Corporation recently reported an EBITDA of $32,200 and $9,500 of net income. The company has $6,800 interest expense, and the corporate tax rate is 35 percent. What was the company’s depreciation and amortization expense?
the population mean grade is 78 with a standard deviation of 6 points. determine the sample size needed to detect an
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Your manager just finished computing your firm's weighted average cost of capital. He is relieved because he says that he can now use that cost of capital to evaluate all projects that the firm is considering for the next four years. Evaluate that st..
Suppose a corporation can change its depreciation method so that its tax payments will decrease by $5,000 this year but increase by $5,000 next year
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The president of Lowell Inc. has asked you to evaluate the proposed acquisition of a new computer. The computer’s price is $60,000 and it falls into the MACRS 3-year class (33% in year 1, 45% in year 2, 15% in year 3, and 7% in year 4). Purchase of t..
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