When the Expected Rate of Return from a Purchase of Equipment

question 5

Multiple Choice

When the expected rate of return from a purchase of equipment is lower than the market interest rate,a firm should _____

• A)seek government assistance in decreasing the market interest rate.
• B)inform stockholders that the firm can expect increased earnings from the purchase.
• C)use the equipment less intensively in production to reduce its depreciation cost.
• D)purchase the equipment.
• E)not purchase the equipment.

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Definitions:

Dependent Variable

In experimental and statistical research, the variable that is being tested and measured to see if it is affected by changes in the independent variable.

Independent Variable

The variable that is manipulated or changed in an experiment to test its effects on the dependent variable.

Demand Characteristics

Any aspects of a study that communicate to the participants how the experimenter wants them to behave.

Validity

The extent to which a test, measurement, or research accurately represents what it aims to measure.