What is the value of the firm's capital stock at the end of period 5?

Question

Quizplus · Accepted Answer

To calculate the value of the firm's capital stock at the end of period 5, we need to use the formula: 
Capital Stock = Beginning Capital Stock + Net Investment

Beginning Capital Stock in period 1 = $500
Net Investment in period 1 = $0
Therefore, capital stock at the end of period 1 = $500

Beginning Capital Stock in period 2 = $500
Net Investment in period 2 = $75
Therefore, capital stock at the end of period 2 = $575

Beginning Capital Stock in period 3 = $575
Net Investment in period 3 = $100
Therefore, capital stock at the end of period 3 = $675

Beginning Capital Stock in period 4 = $675
Net Investment in period 4 = -$150
Therefore, capital stock at the end of period 4 = $525

Beginning Capital Stock in period 5 = $525
Net Investment in period 5 = $87.5
Therefore, capital stock at the end of period 5 = $612.5

Hence, the correct answer is A) 612.5.

What Is the Value of the Firm's Capital Stock at the End