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A county with 1M (M for million) population, 2% unemployment, and no in action, voted to build a stadium and rent it to a professional baseball team. The team owner, who was not a county resident, was to pay $1M per year rent for use of the stadium and pay all maintenance costs. The owner would be responsible for the sale of admission tickets, parking, and concessions (sale of food and memorabilia) and would keep all resulting prots. A cost Benet analysis of the project made the following estimates, treating the county as the community. Construction of the stadium, parking lots, and access roads would cost $300M, 60% of this to be spent on local value added (LVA) provided by county residents. The county would borrow $300M at the beginning of the project to pay for the construction and would repay the loan by raising its property tax. The land for the stadium site, valued at $15M, was already owned by the county. Two million tickets for stadium events would be sold per year, 70% of them to outsiders and the rest to locals (county residents), at an average ticket price of $35. For simplicity assume that every ticket would cost $35. Outsiders would spend an average of $20 on LVA per ticket they bought. This spending would be on local restaurant services, hotel rooms, and other goods and services provided by county residents. In answering the problems below, assume that the annual ticket sales and outsider spending listed above would continue throughout the 40 year lifetime of the stadium. Assume that the locals' marginal propensity to consume LVA was 30% and that their prot rate was 20%. Except in part i below, assume that all the numbers given above are correct. a. Write a formula for the net generated income coming directly from the construction part of the project. Estimate this net generated income, explaining each part of your formula and why you pick each of the numbers you use to get your estimate. Explain why the net new spending on LVA is not equal to the $180M in construction cost that is spent on LVA.
If you were the angel investor, what is your certainty equivalent for these two projects? Are you risk-averse, risk-neutral, or risk-lover?
Demand for microprocessors is given through P=35-5Q, where Q is the quantity of mircochips. The typical company total cost of manufacturing chips is Ci=5qi, where qi is the output of company i.
If the economy is currently producing 40 units of cotton and 6 units of wheat, then what is the approximate opportunity cost of producing 10 more units of cotton?
As a small investor, can I invest either directly or indirectly - in mortgages? What kind of risks would I be undertaking if I did? Are there any other financial instruments that have similar risks? Given the current economic situation, would you inv..
q. brit oxygen whose global sales are generally dollar denominated needs to borrow 50000000 for working capital also
Suppose that society decided to reduce consumption and increase investment. How would this change affect economic growth? What groups in society would benefit from this change?
With the passage of the Affordable Care Act the U.S. government requires that everyone have some form of health insurance. One of the provisions of the law is that firms with more than 50 full-time workers must provide health insurance to those worke..
The NCAA has often been called an “incidental cartel. ”What is an “incidental cartel?”How has the NCAA exercised its cartel power? Give two distinct examples.
Suppose 20 balls are placed in a bag. 10 balls are red, 9 balls are yellow and 1 ball is green. If you draw a red ball you must pay $10. If you draw a yellow ball you get $2. If you draw the green ball you get $100.
What is rent seeking behavior? How does it explain why government has grown in recent years and how it explain why it is difficult to change tax or spending policies in the United States?
Suppose that there are 150 houses in the community with 2,000 square feet (providing services that rent for $10,000 per year). The interest rate is 4% and with proper maintenance all of the houses will last forever. In an election the population deci..
A gourmet ice cream store has fixed cost expenses (rent, utilities, etc.) of $100,000/year. The ice cream cost $5/liters to produce and sell for $7 per liter. The store sells around 150,000 liters of ice cream per year. If the gourmet ice cream store..
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