A Firm Has Current and Future Marginal Productivity of Capital

question 73

Essay

A firm has current and future marginal productivity of capital given by MPK = 10,000 - 2K + N,and marginal productivity of labor given by MPN = 50 - 2N + K.The price of capital is $5000,the real interest rate is 10%,and capital depreciates at a 15% rate.The real wage rate is $15.
(a)Calculate the user cost of capital.
(b)Find the firm's optimal amount of employment and the size of the capital stock.

Understand the legal remedies available for breach of contract, including specific performance and damages.

Appreciate the concept of tender in fulfilling contractual obligations.

Distinguish between express, implied, and conditional contracts and their enforcement.

Understand how contractual obligations can be discharged by performance, operation of law, or other conditions.

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Definitions:

Profitability Index

A financial tool used to evaluate the desirability of an investment, calculated as the present value of future cash flows divided by the initial investment.

Accepted

Acknowledged or approved, typically in the context of an agreement or transaction.

Discount Rate

The discount rate is the interest rate used in discounted cash flow (DCF) analysis to present value future cash flows and assess the attractiveness of an investment.

Net Present Value

An approach to determining the value of an investment by discounting future cash flows to their present value.