Firms Discount Future Profits at the Interest Rate R Because

question 18

Multiple Choice

Firms discount future profits at the interest rate r because

• A) it is the interest rate on their debt.
• B) it is the same rate as for households.
• C) Ricardian equivalence holds.
• D) it has to equal the marginal productivity of capital in equilibrium.

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Definitions:

Assets

Resources owned by a business which are expected to provide future economic benefits.

Landlord

An owner of property, such as land or buildings, who leases or rents it to another party, known as a tenant.

Journalize

The act of recording business transactions in the journal of an accounting system, marking the first step in the accounting cycle.

Normal Balance

The side (debit or credit) of an account that is typically increased; varies depending on the account type.