You Have a Choice Among Three Options

question 22

Multiple Choice

You have a choice among three options.Option 1: receive $900 immediately.Option 2: receive $1,200 one year from now.Option 3: Receive $2,000 five years from now.The interest rate is 15 percent (0.15) per year.Rank these three options from highest present value to lowest present value.

• A)Option 1,Option 2,Option 3
• B)Option 3,Option 2,Option 1
• C)Option 2,Option 3,Option 1
• D)Option 3,Option 1,Option 2
• E)Option 1,Option 3,Option 2

Grasp the principles of economic equity and the various perspectives (Rawlsian, utilitarian, and egalitarian) on equitable outcomes.

Interpret the significance of points on, within, and outside the utilities possibilities frontier in terms of efficiency, equity, and attainability.

Analyze the effects of trade between countries in terms of comparative and absolute advantage.

Explain the conditions for efficiency in production and in the output market, including the roles of marginal rates of substitution and transformation.

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Definitions:

Cost of New Equity

The cost of obtaining additional funding through the issuance of new equity, considering underwriting fees and other issuance costs.

Retained Earnings

The portion of net income that is retained by the corporation rather than distributed to its owners as dividends.

Target Capital Structure

The relative amount of debt, preferred stock, and common equity that the firm desires. The weighted average cost of capital should be based on these target weights.

Cost of Equity

The return a company requires to decide if an investment meets capital return requirements, a crucial part of capital budgeting and often calculated using models like CAPM.