(Consider This) Suppose That Toyota Buys a Factory Previously Owned

question 21

Multiple Choice

(Consider This) Suppose that Toyota buys a factory previously owned by Chrysler Motors. Economists would

• A) consider this to be an economic investment.
• B) not consider this to be an economic investment, because Toyota is less efficient than Chrysler.
• C) not consider this to be an economic investment, because no new capital is created through the purchase.
• D) not consider this to be an economic investment, because there is no way to know how it will affect stock holdings in the two companies.

Understand the concept of the cash payback period and how to calculate it.

Distinguish between net cash flow and net discounted cash flow.

Calculate the expected average rate of return for capital investments.

Differentiate between various capital investment analysis methodologies.

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Definitions:

Bedding

The formation of parallel layers of sediment as they accumulate over time, indicating successive periods of deposition.

Sedimentary Rocks

Rocks formed by the accumulation and compression of mineral and organic particles over time, often found in layers.

Sand Dunes

Natural accumulations or hills of sand formed by the wind or sometimes by water flow, often found in deserts, beaches, and other environments.

Upper Tan Sandstone

A specific layer of sandstone that is characterized by a tan or light brown coloration and occurs in the upper stratigraphic levels.