Exhibit 3-9 Refer to Exhibit 3-9. a Severe Recession Has Sharply Decreased

question 207

Multiple Choice

Exhibit 3-9
Refer to Exhibit 3-9. A severe recession has sharply decreased the incomes of consumers. Knowing that X is a normal good, you expect a movement in the market for X from

• A)A to B.
• B)E to F.
• C)F to E.
• D)B to A.

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Definitions:

Flotation Costs

Expenses incurred by a company in issuing new securities, including underwriting, legal, and registration fees.

Tax Rate

The rate at which taxes are applied to a person or company's income.

WACC

The Weighted Average Cost of Capital; a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new factory, worthwhile.