Answer to Question #124839 in Economics for Amponsah eric

Question

Firm's capital stock values 650 in 2018 and would like to have the desired capital stock of 900 at the end of 2020. assuming the firm would like to close at least 30% of the gap between 2018 and 2020 each year, calculate the firm's current capital stock and gross investment at the end of 2019 if capital consumption is 20%

Answer 1

$650+(900-650)*0.3=725$ - the firm's current capital stock at the end of 2019

x-gross investment

$(650+x)*0.8=725$

$x=256.25$