Use the Following Scenario in Answering the Question

question 27

Multiple Choice

Use the following scenario in answering the question.After reading a newspaper article about gold mining prospects near your home town,your sister commented that it seems as though miners are going after ores with less and less concentrations of the gold.She mentions the rich gold veins and nuggets that she reads about in historical accounts of gold mining and wonders what factors have lead to the change.She tells you that she knows that the days of gold nuggets in the streams are gone,but that she can't believe how small the percentage of gold is in the ore they are now mining.First,you tell your sister that she sounds like your father,commenting on the good old days.Then you explain to her that there are many factors driving the changes and that there are important environmental implications of the mining.
-Which of the following factors were not in your explanation?

• A)Technological inventions can increase the efficiency of gold extraction from the ore.
• B)New sources of the gold ore are found through better exploration techniques.
• C)Technological inventions can increase efficiency of gold processing out of the ore.
• D)As supplies decrease and prices rise it is less rewarding to explore for new sources of the gold.

Acknowledge the preference for NPV over IRR based on reinvestment assumption realism.

Grasp the impact of changes in the discount rate on NPV and its independence from IRR.

Comprehend the conceptual superiority of the NPV method over the IRR method, especially for mutually exclusive investments.

Realize the rationale behind the popular use of the payback period method amidst financial pressures.

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Definitions:

Highly Inelastic

A situation in which demand or supply changes very little in response to large changes in price, often applicable to essential or unique goods and services.

Herfindahl Index

An economic indicator used to measure the size of companies in relation to the industry and the level of competition among them.

Barriers to Entry

Obstacles that make it difficult for new competitors to enter a market, including high start-up costs, strict regulations, and established brand loyalty.