A Company That Produces Computer Peripherals Is Considering Buying Some

question 179

Multiple Choice

A company that produces computer peripherals is considering buying some new equipment that it expects will increase future profits. If the interest rate rises, the present value of these future earnings

• A)rises. The company is more likely to buy the equipment.
• B)rises. The company is less likely to buy the equipment.
• C)falls. The company is more likely to buy the equipment.
• D)falls. The company is less likely to buy the equipment.

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Definitions:

Margarine

A spread used for flavoring, baking, and cooking that is made from vegetable oils and is considered a butter substitute.

Resource Demand

The demand for inputs necessary for the production of goods and services.

MRP

MRP, or Marginal Revenue Product, quantifies the added value generated by employing an additional unit of input in the production process.

Haircut

A reduction applied to the value of an asset for purposes of calculating capital requirements, margining, or risk assessment.