In Example 13.8, we used the unemployment claims data from Papke (1994) to estimate the effect of enterprise zones on unemployment claims. Papke also uses a model that allows each city to have its own time trend. log(uclmst) = ai + cit + β1ezit + uit ,
where ai and ci are both unobserved effects. This allows for more heterogeneity across cities.
(i) Show that, when the previous equation is first differenced, we obtain
△log(uclmsit) = ci + β1△ezit + △uit, t = 2,..., T.
Notice that the differenced equation contains a fixed effect, ci.
(ii) Estimate the differenced equation by fixed effects. What is the estimate of β1? Is it very different from the estimate obtained in Example 13.8? Is the effect of enterprise zones still statistically significant?
(iii) Add a full set of year dummies to the estimation in part (ii). What happens to the estimate of β1?

The link between volume of production and the cost of building manufacturing operations is particularly important in industries characterized byanswers: process innovations.product manufacturing.product innovation.process manufacturing.

Calculate the cost of each capital component—in other words, the after-tax cost of debt, the cost of preferred stock (including flotation costs), and the cost of equity (ignoring flotation costs). use both the capm method and the dividend growth approach to find the cost of equity.calculate the cost of new stock using the dividend growth approach.what is the cost of new common stock based on the capm? (hint: find the difference between re and rs as determined by the dividend growth approach and then add that difference to the capm value for rs.)assuming that gao will not issue new equity and will continue to use the same target capital structure, what is the company’s wacc? e. suppose gao is evaluating three projects with the following characteristics.each project has a cost of $1 million. they will all be financed using the target mix of long-term debt, preferred stock, and common equity. the cost of the common equity for each project should be based on the beta estimated for the project. all equity will come from reinvested earnings.equity invested in project a would have a beta of 0.5 and an expected return of 9.0%.equity invested in project b would have a beta of 1.0 and an expected return of 10.0%.equity invested in project c would have a beta of 2.0 and an expected return of 11.0%.analyze the company’s situation, and explain why each project should be accepted or rejected g

Explain whether each of the following events increases or decreases the money supply. a. the fed buys bonds in open-market operations. b. the fed reduces the reserve requirement. c. the fed increases the interest rate it pays on reserves. d. citibank repays a loan it had previously taken from the fed. e. after a rash of pickpocketing, people decide to hold less currency. f. fearful of bank runs, bankers decide to hold more excess reserves. g. the fomc increases its target for the federal funds rate.