ajaz_eco_204_2012_2013_chapter_12_Long_Run_CMP

We wish the following equation to hold 14 eco

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Unformatted text preview: termine the value for (declining balance depreciation rate) which ensures that ( ) from the equation above is in fact the same as the exogenously given salvage value. We wish the following equation to hold: () ⏟ ( ( ) ) () () () 14 ECO 204 Chapter 12: a Firm’s Cost Minimization Problem (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. { () } () { () } () ) ( ) equals an exogenously given salvage This value of ensures that the value of ( ) calculated via ( ) ( value ( ) With an endogenously determined declining balance depreciation rate we see that since ( ) ( ) ( ): () ( [ () And since ( ) ( { { () } ]) () () } () () () ) () [ ⏟ { () () } ]{ } () ⏟( ) ( () ) For example, suppose a firm purchases capital for $500m with a useful life of 10 years, a salvage value of $100m and uses declining balance depreciation. Then the constant proportion in: () ⏟ ( ) Is: { () } () { } Thus: () Is this right? At ( ) this formula should give us ( ( ) ( () ) ( ) : ) 15 E...
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