Suppose That Interest Rates (And, Therefore, the Firm's Weighted Average

question 72

Multiple Choice

Suppose that interest rates (and, therefore, the firm's weighted average cost of capital) increase. This WOULD NOT CHANGE the capital budgeting choices a firm would make if it

• A) uses payback method analysis.
• B) uses net present value analysis.
• C) uses internal rate of return analysis.
• D) uses profitability indices.

---

Definitions:

Trade

The exchange of goods, services, or both between two or more parties, either within a country or internationally.

Resource Scarcity

A situation where resources are limited in availability and cannot satisfy all uses and desires.

Opportunity Costs

The potential benefits an individual, investor, or business misses out on when choosing one alternative over another.

Equilibrium

A state in a market where supply equals demand, meaning that there is no tendency for the market price to change unless external factors alter supply or demand.