Assume a New Technology Further Reduces the Cost of Producing

question 67

Multiple Choice

Assume a new technology further reduces the cost of producing calculators.Also assume that consumers have cut back on their scheduled purchases in anticipation of even more cost-saving developments.As a result, we can expect

• A)a decrease in price but no predictable change in output.
• B)a decrease in output but no predictable change in price.
• C)an increase in output but no predictable change in price.
• D)a predictable decrease in both output and price.

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Definitions:

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

Capital Budgeting

The process of evaluating and selecting long-term investments that are consistent with the firm's goal of wealth maximization.

After-Tax Cost

The net cost of a transaction or investment after the effects of taxes are considered, often used in analyzing the cost of financing options.

Specific Capital

This refers to the various types of capital (debt, equity, etc.) a company uses for financing its operations and investments, with each type having its own cost and characteristics.