Problem
1. What causes the demand for housing to increase and how do each of these determinants affect residential investment?
2. Assume Luke is considering investing in new equipment and computers for his construction company. The real interest rate is 5%, construction equipment is valued at $600,000, and computers are valued at $20,000. Neither type of capital is expected to change its price during the next year.
a) Calculate the user cost of capital for construction equipment, assuming it depreciates at a 10% annual rate.
b) Suppose the annual depreciation rate for computers is 35%. Calculate the user cost of capital for computers.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.