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Liyun Owns a Small Flower Shop, and the Industry Is

question 260

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Liyun owns a small flower shop, and the industry is perfectly competitive. She is considering whether to hire an additional worker. The wage rate for the worker is $500 per week; the marginal product of the additional worker would be 100 units per week; and the price of the units is $10 each. What should Liyun do?


Definitions:

Cost of Debt Capital

The effective rate that a company pays on its current debt, which can be measured as the after-tax rate of return to lenders or creditors.

Creditors Demand

The situation in which creditors request or require payment of money owed to them by the company.

New Borrowings

Funds that a company or government secures by entering into a new loan agreement.

Coupon Rates

The coupon rate is the annual interest rate paid on a bond, expressed as a percentage of the face value.

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