Barometric Price Leadership Exists When

question 18

Multiple Choice

Barometric price leadership exists when

• A) one firm in the industry initiates a price change and the others follow it as a signal of changes in cost or demand in the industry.
• B) one firm imposes its best price on the rest of the industry.
• C) all firms agree to change prices simultaneously.
• D) one company forms a price umbrella for all others.
• E) the firms are all colluding.

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Definitions:

After-tax Cash Flows

The net amount of cash that remains after all tax liabilities have been deducted from a company's revenues.

Required Return

The lowest yearly percentage gain from an investment required to attract individuals or businesses to invest in a specific security or project.

Profitability Index

A calculation used in capital budgeting to determine the relative profitability of an investment, computed as the present value of future cash flows divided by the initial investment cost.

Crossover Rate

The crossover rate is the rate of return at which two projects have the same net present value (NPV), used in capital budgeting to compare the desirability of investments or projects.