Table 11-1 Consider the Town of Anywhere with Only Three Residents, Mary

question 168

Multiple Choice

Table 11-1
Consider the town of Anywhere with only three residents, Mary, Bill, and Tricia. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park.

-Refer to Table 11-1.Suppose the cost to build the park is $33 per acre.How many acres should the park be to maximize total surplus from the park in Anywhere?

• A) 2 acres
• B) 3 acres
• C) 4 acres
• D) 5 acres

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Definitions:

FCFF

Free Cash Flow to the Firm, a measure of a company's financial flexibility that represents the amount of cash generated by a company that is available for distribution among all its security holders.

Tax Bracket

Categories of income tax rates that increase progressively with the amount of taxable income.

FCFE

Free Cash Flow to Equity (FCFE) is the amount of cash available to the equity shareholders of a company after all expenses, reinvestment, and debt payments have been made.

Intrinsic Value

The actual perceived value of a company, stock, currency, or product determined through fundamental analysis without reference to its market value.