In a Cartel,how Does the Number of Firms Affect the Likelihood

question 41

Essay

In a cartel,how does the number of firms affect the likelihood that the cartel will be able to successfully maintain a high price?

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Definitions:

Cost of Equity

The return that a company requires to decide if an investment meets capital return requirements and is often used in financial modeling for valuing a company.

Market Capitalization Rate

The expected rate of return on a portfolio consisting of all publicly traded securities, weighted by market capitalization.

PVGO

Present Value of Growth Opportunities; the portion of a company's stock price that is attributed to its expected earnings growth.

Free Cash Flow

The amount of cash generated by a company after accounting for capital expenditures, necessary to maintain or expand the asset base.