PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 9, Problem 9.5CC
To determine
Determine whether Person L purchases the mower or not.
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Tim lives in Vancouver and runs a business that sells pianos. In an average year, he receives $733,000 from selling pianos. Of this sales revenue, he must pay the manufacturer a wholesale cost of $433,000; he also pays wages and utility bills totalling $257,000. He owns his show room; if he chooses to rent it out, he will receive $13,000 in rent per year. Assume that the value of this show room does not depreciate over the year. Also, if Tim does not operate this piano business, he can work as a paralegal, receive an annual salary of $23,000 with no additional monetary costs, and rent out his show room at the $13,000 per year rate. No other costs are incurred in running this piano business.
Sunk Cost - Peter Takesha, the manager of testing services at a medical diagnostics firm, purchased a new lab testing machine last year for $30,000. This year a new ma-chine, which is faster and more reliable than Peter's current model, is on the market. In deciding whether to purchase the new machine, should Peter consider how much he paid for the old ma-chine? Should he consider the value of the old machine in the used equipment market?
Show transcribed image text Honda Motor Company is considering offering a $2,000 rebate on its minivan, lowering the vehicle's price from $30,100 to $28,100. The marketing group estimates that this rebate will increase sales over the next year from 42,000 to 54,400 vehicles. Suppose Honda's profit margin with the rebate is $5,260 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ ____ million. (Round to one decimal place.) The benefit of the rebate will be $ _____ million. (Round to one decimal place.) Is it a good idea? does or does not Offering the rebate ____ look attractive.
Chapter 9 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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- Joe is self-employed in a store that has a rental value of $500 a month which he pays, but he can vacate the building without giving notice. His other expenses are $100 a month for maintenance. He makes $25,000 a year on net sales (total revenue minus the wholesale cost of the product). If he quit his job and worked the same number of hours elsewhere at a job he liked equally well, he estimates that he could make $20,000 a year. No one else can be hired to work in the store. Joe should A B C D quit his job. keep the job. work part-time. It is impossible to say with the information given in the problemarrow_forwardYou plan to purchase a car for $28,000. Its market value will decrease by 20% per year. You have determined that the IRS- allowed mileage reimbursement rate for business travel is about right for fuel and maintenance at $0.485 per mile in the first year. You anticipate that it will go up at a rate of 10% each year, with the price of oil rising, influencing gasoline, oils, greases, tires, and so on. You normally drive 15,000 miles per year. What is the optimum replacement interval for the car? Your MARR is 9%.arrow_forwardHonda Motor Company is considering offering a $1,800 rebate on its minivan, lowering the vehicle's price from $31,000 to $29,200. The marketing group estimates that this rebate will increase sales over the next year from 40,900 to 53,500 vehicles. Suppose Honda's profit margin with the rebate is $5,340 per vehicle. If the change in sales is the only consequence of this decision, what are its costs and benefits? Is it a good idea? Hint: View this question in terms of incremental profits. The cost of the rebate will be $ million. (Round to one decimal place.) The benefit of the rebate will be $ million. (Round to one decimal place.) Is it a good idea? (Select from the drop-down menu.) Offering the rebate look attractive. does not doesarrow_forward
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- A construction manager just starting in private practice needs a van to carry crew and equipment. She can lease a used van for $3,777 per year, paid at the beginning of each year, in which case maintenance is provied. Alternatively, she can buy a used van for $5,669 and pay for maintenance herself. She expects to keep the van for three years at which time she could sell it for $1,110. What is the most she should pay for uniform annual maintenance to make it worthwhile to buy the van instead of leasing it, if her MARR is 20%?arrow_forwardBob lives in Toronto and runs a business that sells guitars. In an average year, he receives $701,000 from selling guitars. Of this sales revenue, he must pay the manufacturer a wholesale cost of $420,000; he also pays wages and utility bills totalling $247,000. He owns his show room; if he chooses to rent it out, he will receive $9,000 in rent per year. Assume that the value of this show room does not depreciate over the year. Also, if Bob does not operate this guitar business, he can work as a financial advisor, receive an annual salary of $32,000 with no additional monetary costs, and rent out his show room at the $9,000 per year rate. No other costs are incurred in running this guitar business.arrow_forwardPaolo lives in Philadelphia and operates a small company selling scooters. On average, he receives $712,000 per year from selling scooters. Out of this revenue from sales, he must pay the manufacturer a wholesale cost of $412,000. He also pays several utility companies, as well as his employees wages totaling $269,000. He owns the building that houses his storefront; if he choose to rent it out, he would receive a yearly amount of $1,000 in rent. Assume there is no depreciation in the value of his property over the year. Further, if Paolo does not operate the scooter business, he can work as a nurse and earn a yearly salary of $21,000 with no additional monetary costs, and rent out his storefront at the $1,000 per year rate. There are no other costs faced by Paolo in running this scooter company. (Questions in images)arrow_forward
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