Exam 13: Capital, Interest, and Corporate Finance

Exhibit 13-6 In Exhibit 13-6, assume that sewing machines last indefinitely, operating expenses are negligible and output is expected to be constant in the future.If sewing machines can be purchased for $720 each and the market interest rate is 10%, how many sewing machines should the firm purchase?

Corporations can acquire funds for investment projects through

The Great Homebody Nationwide Sweepstakes promises its winners a choice between $200, 000 now or $120, 000 now and $100, 000 next year.The winners should take the $200, 000 now

The interest rate compensates

If Andre Preneur puts together a company that yields a profit of $40, 000 per year and this profit stream is expected to continue indefinitely, what price can he sell the company for if the discount rate equals 8 percent?

If a person saves $1, 000, how much will she have at the end of three years if the market interest rate is 6 percent?

A firm is considering the purchase of a piece of equipment that will add $200 per year to the firm's revenue forever.If the interest rate is 10 percent, the firm will purchase the equipment so long as it costs less than

If the interest rate is 8 percent, a person who is offered the opportunity to buy an annuity paying $30, 000 per year forever should

If consumers elect to postpone consumption so they can have a more enjoyable future, the supply of loanable funds would increase and the market rate of interest would fall.

Marginal revenue product for a price taker equals

The market value of ABC Corp., whose securities are publicly traded, can be found by

If a person produces capital goods, she sacrifices current production of consumer goods in order to obtain the capability of producing more goods and services in the future.This is called roundabout production.

Exhibit 13-8 In Exhibit 13-8, D₀ and S₀ represent the initial demand and supply of loanable funds.An increase in the expected rate of inflation would shift the equilibrium in this market from point a to

The old adage that "a bird in the hand is worth two in the bush" refers to

When a start-up company meets with success and the entrepreneur needs to achieve economies of scale, it would not make economic sense to consider an IPO.

A firm's marginal rate of return on investment curve shows the amount

Which of the following would cause a fall in the market interest rate?

Exhibit 13-10 Consider Exhibit 13-10.Which of the lines represents the pattern of the expected rate of return on investment for most firms?

The term structure of interest rates describes the relationship between the rate of interest charged and the

Exhibit 13-6 In Exhibit 13-6, if the rental price of each sewing machine is $70, how many machines should be used?