3.Ballreich’s has observed that quantity of values in a town increases from 20000 bags per week to 24000 bags per week where it increases advertising expanding from $32000 to $33000. It has also in the market that the number of sales increases from 12000 to 13000 bags per week when its competitors raise their prices from 3.50 per bag to 3.75 per bag( while their advertising remain consistent) A. Ballreich’s knows that the price of electricity demand is 4.7 . If Budweiser increased their advertising by 10% and increased prices by 15%. By what percent would the quantity of sales change ? Short Answer Apply:

 

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3. An oil company contemplates investing 100 million dollars per year (in constant dollars) for five years in exploratory work to confirm the existence of new exploitable reserves. It will then face a potential delay until market conditions justify exploitation, which will require investing 200 million dollars for three years in production facilities, following which delivery of oil can start with a projected net revenue of 100 million dollars per year, essentially ad infinitum.

a. At a real discount rate of 5%/yr what is the longest delay tolerable between the start of exploitation and the start of oil delivery: i.e., how far in advance is it worth proving out reserves?

b. If the real discount rate were 10%/yr, what is the maximum time delay?

 

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3) Explain carefully the Keynesian theory of money demand. Then discuss the critiques made by Friedman to the Keynesian theory of money demand. 4) Derive carefully the IS curve and discuss the determinants of its slope and its position.

 

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3.    Examine the proof of Bessel’s inequality and show that equality holds if the Fourier series of ϕ converges to ϕ uniformly. This is known as Parseval’s equality. Apply Par- seval’s equality to the Fourier series in Example 6.4.3 to derive the summation identity

∞

     1        π4

 

n=1

n4  = 90 .

 

 

 

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3.Evaluate the profitability of the project whith the NPV ,IRR, simple payback period ,and discounted payback period methods.Is the project acceptable? Briefly explain. Why is the NPV method superior to the other methods of capital budgeting? Briefly explain.

 

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