Suppose you are working for a firm producing cotton balls – an industry for which there are many different firms producing an identical product. the market price is $20 per case of cotton balls, and the firm is currently producing 30 cases. as the manager tasked with making production decisions for the firm, you begin by estimating the cost function, and find that the cost function is given by: = 10 + + 1/3 .

a. is this a short run or long run cost function?

b. what adjustments to the production decisions would you make to increase profits?

c. given your recommendation to (b) above, by how much would the firm’s profits increase?

The cost of capital: introduction the cost of capital: introduction companies issue bonds, preferred stock, and common equity to aise capital to invest in capital budgeting projects. capital is』necessary factor of production and like any other factor, it has a cost. this cost is equal to the select the applicable security. the rates of return that investors require on bonds, preferred stocks, and common equity represent the costs of those securities to the firm. companies estimate the required returns on their securities, calculate a weighted average of the costs of their different types of capital, and use this average cost for capital budgeting purposes. required return on rate: when calculating om operations when the firm's primary financial objective is to select shareholder value. to do this, companies invest in projects that earnselect their cost of capital. so, the cost of capital is often referred to as the -select -select and accruals, which a se spontaneously we hted average cost of capital wa c our concern is with capital that must be provided by select- 쑤 interest-bearing debt preferred stock and common equity. capital budgeting projects are undertaken, are not included as part of total invested capital because they do not come directly from investors. which of the following would be included in the caculation of total invested capital? choose the response that is most correct a. notes payable b. taxes payable c retained earnings d. responses a and c would be included in the calculation of total invested capital. e. none of the above would be included in the cakulation of total invested capital.