If the Marginal Rate of Return Expected from a Purchase

question 8

Multiple Choice

If the marginal rate of return expected from a purchase of equipment is greater than the market interest rate, the firm should

• A)not purchase the equipment
• B)purchase the equipment
• C)either purchase or not purchase the equipment, depending on the marginal resource cost
• D)inform stockholders that the company expects a decrease in earnings from the purchase
• E)seek government assistance in raising market interest rates