Refer to the following selected financial information from mccormik, llc. compute the company's acid-test ratio for year 2. year 2 year 1 cash $ 37,500 $ 36,850 short-term investments 90,000 90,000 accounts receivable, net 85,500 86,250 merchandise inventory 121,000 117,000 prepaid expenses 12,100 13,500 plant assets 388,000 392,000 accounts payable 113,400 111,750 net sales 711,000 706,000 cost of goods sold 390,000 385,500

3. saving two consumers, larry and jeff, have utility functions defined over the two periods of their lives: middle age (period zero) and retirement (period 1). they have the same income in period 0 of m dollars and they will not earn income in period 1. the interest rate they face is r. larry’s and jeff’s utility functions are as follow. = 0.5 + 0.5 and = 0.5 + 0.5 for each person is between zero and one and represents each consumer’s temporal discount econ 340: intermediate microeconomics. ben van kammen: purdue university. rate. a. write the budget constraint that applies to both jeff and larry in terms of consumption in each period and ), interest rate, and m. b. what is larry’s and what is jeff’s marginal rate of intertemporal substitution? c. what is the slope of the budget constraint? d. write each consumer’s condition for lifetime utility maximization. e. re-arrange the conditions from part (d) to solve for the ratio, . f. if > which consumer will save more of his middle age income? g. if > 1 1+ , in which period will larry consume more: = 0 or = 1?