When a Firm Is Considering Whether to Buy a New

question 94

True/False

When a firm is considering whether to buy a new piece of equipment with retained earnings,the amount of interest that could be earned on that money is an explicit cost and should be treated as such.

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Definitions:

EMH

The Efficient Market Hypothesis, a theory that suggests all known information is already reflected in stock prices, and therefore, beating the market consistently through stock selection or market timing is unlikely.

Passive Investment

An investment strategy that involves minimal buying and selling actions, typically focused on long-term investments in index funds or ETFs.

Hedge Funds

Investment funds that employ various strategies to earn active return, or alpha, for their investors, often involving leverage, derivatives, and short selling.

Intensively Bought

Refers to securities that are being purchased in large volumes over a short period, indicating strong investor interest or confidence in the asset.