Question1. Lucky Corporation has a capital budgeting project that has a negativenet present value of P36,000. The life of this project is 6 years. Luck’y’s discount rate is 20%. Without regard for income tax effects, by how much would the annual cash inflows from this project have to increase in order to have a positive net present value?a. P10,824 or moreb. P1,200 or morec. P6,000 or mored. P2,412 or more2. Ate Nenita, a banana cue vendor, was able to buy bananas at a significantly lower price than usual. She bought bananas at the regular price of P2.00 per piece, and she normally bought 75 pieces from the vendor because her budget for bananas was P150. This time, the banana vendor offered the bananas to her at P1.25 per piece. Since Ate Nenita has a budget of P150 for bananas, she decides to buy 120 pieces at the lower price of P1.25. This is an example ofa. Neither the income effect nor the substitution effectb. The income effectc. Both the income effect and the substitution effectd. The substitution effect3. If the percentage change in price is -65%, and the percentage change in quantity demanded is 50%, what is the price elasticity of demand and its corresponding interpretation?a. -1.30; quantity demanded is not as responsive to changes in priceb. -1.30; quantity demanded is very responsive to changes in pricec. -0.77; quantity demanded is not as responsive to changes in priced. -0.77; quantity demanded is very responsive to changes in price4. Lovely is a seller of jewelry and collectible items, whose clients are usually the upper class families of the metropolis. A specific jewelry item has a price of P2.5 million, and at this time, four of her clients bought one piece each of this jewelry item. When Lovely raised the price of this jewelry item to P3.5 million, she was able to sell seven pieces of this jewelry item. What is the best explanation for this situation?a. The price elasticity of demand is 1.875, which indicates that the quantity demanded is responsive to changes in the price.b. The price elasticity of demand is 0.533, which indicates that the quantity demanded is not as responsive to changes in the price.c. The price elasticity of demand is -0.533, which indicates that the quantity demanded is not as responsive to the changes in the price.d. This kind of commodity illustrates an exception to the law of demand, since in this situation, the increase in the price has caused an increase in the quantity demanded.AccountingBusinessCost AccountingBSA 201
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