Assume That a Country's Production Function Is Y = K1/2L1/2

question 16

Essay

Assume that a country's production function is Y = K1/2L1/2. a. What is the per-worker production function y = f(k)?
b. Assume that the country possesses 40,000 units of capital and 10,000 units of labor. What is Y? What is labor productivity computed from the per-worker production function? Is this value the same as labor productivity computed from the original production function?
c. Assume that 10 percent of capital depreciates each year. What gross saving rate is necessary to make the given capital-labor ratio the steady-state capital-labor ratio? (Hint: In a steady state with no population growth or technological change, the saving rate multiplied by per-worker output must equal the depreciation rate multiplied by the capital-labor ratio.)
d. If the saving rate equals the steady-state level, what is consumption per worker?

Apply the dividend growth model to calculate the value of a stock.

Calculate and interpret the required rate of return on a stock.

Analyze the impact of dividend growth rates on stock valuations.

Calculate dividends based on growth rates and payout ratios.

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