For the Purposes of Integrating Forward-Looking Business Investment Decisions into a Model

question 1

Multiple Choice

For the purposes of integrating forward-looking business investment decisions into a model of macroeconomic behavior, capital employment decisions proceed along at least two dimensions. The most important of these considerations are

• A) how much capital stock to maintain and how much to depreciate.
• B) how much capital stock to maintain and how quickly to achieve that stock by a flow of investment expenditure.
• C) how much capital to rent and how much to purchase.
• D) how much of the capital that is rented should be depreciated and how much should be sent back.
• E) how fast to expand the capital stock of a growing division and how fast to contract the capital stock of a failing division.

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Definitions:

Dividend Payout

Dividend Payout refers to the proportion of earnings that a company distributes to its shareholders as dividends.

NPV Projects

Projects evaluated using Net Present Value, a method to calculate the profitability by comparing the present value of cash inflows with the present value of cash outflows over time.

Low Dividend Payouts

A company strategy of distributing relatively small portions of earnings to shareholders as dividends.

NPV Projects

Projects evaluated based on the Net Present Value method, which calculates the difference between the present value of cash inflows and outflows to determine profitability.