Tutor profile: Mahima K.
Running at the same constant rate, 6 identical machines can produce a total of 33 widgets per hour. At this rate, how many widgets could 14 such machines produce in 3 hours? A) 66 B) 231 C) 462 D) 693 E) 909
B. The fastest, most GMAT efficient way to solve this problem is by doing a ballpark estimation. The 6 machines made 33 widgets in an hour. Since 14 is over double the amount, we can assume that it's going to be over 66 an hour. Since they work for three hours, we can say that final number will be slightly over 66*3 = 198. The closest number to this 231, or B. If we want to feel more precise in our calculations, we can say that 14 is 2.3333 (2 and 1/3) times the original six machines. Since the original machines were producing 33 an hour, the new arrangement, working for three hours will produce 33*2.33333*3 = 321, which is choice B. We can therefore see, that by using the estimation method, we can save a lot of time, and arrive at the correct choice.
Subject: Corporate Finance
What is time value of money?
The basic concept of time value of money states that because cash you have on hand right now can be invested in the market to make a return, money today is worth more than money tomorrow. Similar to the economics concept of opportunity cost, it states that the value of money is not only face value of money, but the potential gains you could get from investing it for a period of time. If someone was to give me 1 million dollars ten years from now, the value of that money today for me would be that 1 million dollars, plus the return I could get if I had it invested at a reasonable interest rate right now.
What is the total economic cost of a decision and how does this differ from the accounting cost? Provide an example
A total cost a decision, is the sticker price of the option, plus the opportunity cost of the action. An opportunity cost is the cost of what else you could be doing with your time. It is the loss of a potential gain you could be getting from doing something else. This is different from the accounting cost of an action, since the accounting cost is purely the sticker price. For example, if I were to take a dance class that costs 20 dollars. If I didn't take that dance class, I could be watching a movie instead. The accounting cost of the dance class is simply $20. To calculate the economic cost however, I will need to value the benefit I would get from watching that movie, and add that to the 20 dollars.
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