Suppose the Capital Stock Increases by 10% and the Number

question 34

Essay

Suppose the capital stock increases by 10% and the number of employed workers increases by 5%.Given this information,explain what will happen to output and to output per worker.

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Definitions:

Internal Rate

Often refers to the internal rate of return (IRR), a metric used in capital budgeting to estimate the profitability of investments.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

NPV Decision Rules

Guidelines used to determine the viability of an investment or project based on the Net Present Value, which calculates the present value of cash inflows minus the present value of cash outflows.

Shareholder Wealth

The total value of a company to its shareholders, typically measured by the market capitalization or the equity value of the company.