A Newspaper Ad for a Local Toy Store Indicates That

question 33

Multiple Choice

A newspaper ad for a local toy store indicates that a very inexpensive microscope available for a small child is able to magnify specimens nearly as much as the much more costly microscope available in your college lab. What is the primary reason for the price difference?

• A) The ad agency is misrepresenting the ability of the toy microscope to magnify.
• B) The toy microscope does not have the same fine control for focus of the specimen.
• C) The toy microscope magnifies a good deal, but has low resolution and therefore poor quality images.
• D) The college microscope produces greater contrast in the specimens.
• E) The toy microscope usually uses a different wavelength of light source.

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Definitions:

Market Capitalization Rate

A rate used to evaluate the valuation of an investment market, typically calculated as the total market cap of all companies in the market divided by the market's total earnings.

Per Share FCFE

The amount of free cash flow to equity (FCFE) available to shareholders divided by the number of outstanding shares.

Required Rate of Return

The minimum expected return by an investor for investing in a risky asset, considering the risk involved.

FCFF

Free Cash Flow to Firm; a measure of financial performance that expresses the net amount of cash that is generated for the firm, inclusive of financing and debt service.