Investment decisions: look ahead and reason back
a. define compounding and discounting?
b. If I give you PV or FV, r, and k,
c. can you calculate FV or PV?
d. can you tell me what each of those terms means and how we might utilize this information?
e. can you explain the risk of “hyperbolic discounting”?
f. Can you state the NPV rule and complete a simple NPV analysis, such as in the text or homework?
g. define short run versus long run?
i. Regarding break-even analysis, can you define and/or calculate:
j. Contribution margin
k. Breakeven quantity and/or breakeven price
l. Shutdown price in the short run and the long run
m. The output at which you are indifferent between two, for instance, technology options
n. And would you know what to advise when output is either higher or lower than the break-even quantity?
o. Can you distinguish when marginal analysis versus breakeven analysis is the proper decision-making tool?
p. Can you describe the post-investment hold-up problem and how to mitigate against it?
Testbook use for this assignment is ;
Managerial Economics
Froeb Chapters