Questions from Managerial Economics

Q: A sheep rancher leased the mineral rights beneath her grazing land to

A sheep rancher leased the mineral rights beneath her grazing land to an oil company. She fears that discharges from the oil wells will pollute her underground water resources. Consequently, the contr...

Q: Branding Iron Products, a specialty steel fabricator, operates a plant

Branding Iron Products, a specialty steel fabricator, operates a plant in the town of West Star, Texas. The town has grown rapidly because of recent discoveries of oil and gas in the area. Many of the...

Q: A firm has the opportunity to invest in a project having an

A firm has the opportunity to invest in a project having an initial outlay of $20,000. Net cash inflows (before depreciation and taxes) are expected to be $5,000 per year for five years. The firm uses...

Q: The Department of Transportation wishes to choose between two alternative accident prevention

The Department of Transportation wishes to choose between two alternative accident prevention programs. It has identified three benefits to be gained from such programs: • Reduced pr...

Q: A machine that costs $12,000 is expected to operate

A machine that costs $12,000 is expected to operate for 10 years. The estimated salvage value at the end of 10 years is $0. The machine is expected to save the company $2,331 per year before taxes and...

Q: A company is planning to invest $75,000 (before

A company is planning to invest $75,000 (before taxes) in a personnel training program. The $75,000 outlay will be charged off as an expense by the firm this year (year 0). The returns estimated from...

Q: Alliance Manufacturing Company is considering the purchase of a new automated drill

Alliance Manufacturing Company is considering the purchase of a new automated drill press to replace an older one. The machine now in operation has a book value of zero and a salvage value of zero. Ho...

Q: The Charlotte Bobcats, a professional basketball team, has been offered

The Charlotte Bobcats, a professional basketball team, has been offered the opportunity to purchase the contract of an aging superstar basketball player from another team. The general manager of the B...

Q: The Gordon Company currently pays an annual common stock dividend of $

The Gordon Company currently pays an annual common stock dividend of $4.00 per share. Its dividend payments have been growing at a steady rate of 6 percent per year, and this rate of growth is expecte...

Q: The state of Glottamora has $100 million remaining in its budget

The state of Glottamora has $100 million remaining in its budget for the current year. One alternative is to give Glottamorans a one-time tax rebate. Alternatively, two proposals have been made for st...