If the Return on Capital Is 12 Percent and the Price

question 9

Multiple Choice

If the return on capital is 12 percent and the price for loanable funds is 14 percent, then

• A)currently businesses will not borrow loanable funds to invest in capital goods.
• B)eventually the return on capital will decrease to the point where businesses will find it profitable to borrow loanable funds.
• C)the return on capital will fall as the supply of capital decreases over time, and simultaneously, the price for loanable funds will increase as savers make even more savings available.
• D)There is not enough information provided to answer the question.

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Definitions:

Ethical Codes

Ethical codes are sets of principles and guidelines designed to help professionals conduct their activities in an honest and ethical manner.

Moralistic Managers

Leaders who prioritize ethical considerations and moral values in their decision-making processes and management styles.

Ambiguous Situations

Scenarios or circumstances that lack clarity and can be interpreted in multiple ways, often leading to uncertainty and confusion in decision making.

Terminal Value

The estimated value of an investment at the end of its life, considering all future cash flows reduced to their present value.