The Price Index in 2006 Is 120,and in 2007 It

question 76

Multiple Choice

The price index in 2006 is 120,and in 2007 it is 127.2.What is the inflation rate?

• A)5.4 percent
• B)6.0 percent
• C)7.2 percent
• D)The inflation rate is impossible to determine without knowing the base year.

Differentiate between the methods of valuing a company and the exclusions in the valuation process.

Calculate and interpret price/earnings ratios and their relation to equity cost of capital.

Assess the influence of retained earnings and the return on new investments on the growth rate in earnings.

Analyze the factors affecting a firm's price/earnings ratio and the implications of risk-adjusted cost of capital.

---

Definitions:

Consumer Surplus

The gap in the price consumers are willing to shell out for a good or service versus what they actually do.

Consumer Surplus

The disparity between what consumers are prepared and capable of paying for a product or service versus what they actually end up paying.

Total Expenditure

The sum amount of money spent by consumers to purchase a certain quantity of goods or services.

Point Price Elasticity

A measure of how responsive the quantity demanded of a good is to a change in its price at a specific point on the demand curve.