Larry Is Trying to Decide Whether to Purchase a New

question 38

Multiple Choice

Larry is trying to decide whether to purchase a new bulldozer to expand his business.He is confident he has enough work to keep the bulldozer busy and that repaying the loan will not be a problem.What advice would you give Lance?

• A)If the interest rate on the loan is less than the return on assets for the bulldozer, buy.
• B)If the return on this asset is more than the return on his equity, don't buy.
• C)If his current return on equity is greater than the return on this asset, buy.
• D)If his total asset turnover rate is greater than one, don't buy.

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Definitions:

Robinson-Patman Act

U.S. federal legislation that forbids producers from engaging in practices that prevent fair competition, especially through price discrimination.

Price Discrimination

A pricing strategy where identical or substantially similar goods or services are sold at different prices by the same provider.

Raw Materials

Basic substances or components that are used in the production of goods or finished products.

Price Discrimination

The practice of selling the same product to different customers at different prices, typically based on factors like quantity purchased, customer demographic, or market location.