The Table Shows the Rate of Return and R&D Spending

question 306

Multiple Choice

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 7 percent. What is the optimal amount of R&D expenditures?

• A)$30 billion
• B)$42 billion
• C)$36 billion
• D)$48 billion

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Definitions:

Host-Country National

A citizen of the country where a foreign subsidiary or operation is located, employed by the subsidiary.

Guest-Country National

An individual who is a citizen of the country in which an international company operates, but the company is based in another country.

Third Country

A nation that is neither the home country of the company nor the host country where it operates; it's an unrelated, third-party country.

Parent Country

The country in which a multinational company's headquarters is located.