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What is the value of the tax-adjusted user cost of capital

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Suppose that the economy wide expected future marginal product of capital is MPKF = 20 - 0.02K, where K is the future capital stock.

The depreciation rate of capital, d, is 20% per period.

The current capital stock is 900 units of capital. The price of a unit of capital is 1 unit of output. Firms pay taxes equal to 15% of their output.

The consumption function in the economy is C=100+.5Y-200r, where C is consumption, Y is output, and r is the real interest rate. Government purchases equal 200, and full-employment output is 1000.

Suppose that the real interest rate is 10% per period. What is the value of the tax-adjusted user cost of capital? Round your answer to at least 4 decimal places.

Reference no: EM132667876

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