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Role of economic value and replacement value (This problem requires understanding of the concept of present values)"To me, economic value is the only justifiable basis for measuring plant assets for purpose of evaluating performance. By economic value, I mean the present value of expected future services. Still, we do not even do this on acquisition of new assets- that is, we may compute a positive net present value, using discounted cash flow; but we record the asset at no more than its cost. In this way, the excess present value is not shown in the initial balance sheet. Moreover, the use of replacement costs in subsequent years is also unlikely to result in showing economic values. The replacement cost will probably be less than the economic value at any given instant in an asset's life."Market values are totally unappealing to me because they represent a second-best alternative value- that is, they ordinarily represent the maximum amount obtainable from an alternative that has been rejected. Obviously, if the market value exceeds the economic value of the assets in use, they should be sold. However, in most instances, the opposite is true; market value of individual assets are far below their economic value in use."The obtaining and recording of total present values of individual assets based on discounted-cash-flow techniques is an infeasible alternative. I, therefore, conclude that replacement cost (less accumulated depreciation) of similar assets producing similar services is the best practical approximation of the economic value of the assets in use. Of course, it is more appropriate for the evaluation of the division's performance than the division manager's performance."Critically evaluate these comments. Please do not wander; concentrate on the issues described in the quotation.
Suppose there is a big drop in charitable giving. At the same time there has been no decline in per capita income or total employment. Using the economic model, what potential factors might have led to this decline in giving?
A monopolist's marginal revenue curve crosses its marginal cost curve a twenty per unit & one million units. the price that consumers are wants to pay is thirty per uint.
What other suppliers might face a downward-sloping demand curve and what implications does this have for their advertising budget as compared to suppliers with horizontal demand curves?
Should there be an increase in regulation enacted to cause companies to better market their products and services? Why or why not? Provide an example to support your response.
What if a company employs ten workers and pays each $15 each hour. Further suppose that the MP of the 10th worker is five units of output
Present an economic argument to explain why firms often have mandatory retirement (where allowed by law). How do influence costs affect pay within internal labor markets?
Production function and Factors of production and Production Possibilities frontier
For what reasons might the long-run aggregate supply curve be (a) Vertical; (b) Upward sloping; (c) Downward sloping?
Prepare a Marginal Cost Analysed Income Statement for 2014 from the above data to identify total and individual medical procedure contributions and profits.
How does the division of labor lead to more efficient production - What are some examples of division of labor and specialization from your personal experiences?
The objective is to understand the vertical boundaries a company or firm or organisation from the perspective of the vertical chain and the production process.
Explain why an investor is usually better off if she holds a diversified portfolio rather than investing all her resources in the stock of one company.
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