Wicker Corporation Is Determining Whether to Support $100,000 of Its

question 126

Multiple Choice

Wicker Corporation is determining whether to support $100,000 of its permanent current assets with a bank note or a short-term bond.The firm's bank offers a two-year note where the firm will receive $100,000 and repay $118,810 at the end of two years.The firm has the option to renew the loan at market rates.As an alternative,the firm can sell its own 8.5 percent annual coupon bonds,with $1,000 face value and 2-year maturity,at a price of $973.97.Comparing the cost of the two alternatives,how many percentage points lower is the interest rate on the less expensive debt instrument?

• A) 0%;the rates are equal.
• B) 1.2%
• C) 1.0%
• D) 1.8%
• E) 0.6%

Understand how the free-rider problem affects the provision of public goods.

Analyze conditions under which public goods should be provided to enhance social welfare.

Calculate the efficient number of public goods based on marginal cost and marginal social benefit.

Understand the concept of marginal social benefit and marginal social cost in the context of public goods and common resources.

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Definitions:

Malicious Prosecution

A legal action wrongfully initiated against someone without proper grounds, with the intent of causing damage or distress.

Criminal Conviction

A formal declaration that someone is guilty of a criminal offense, usually following a trial or plea of guilty.

Assault

An act that threatens physical harm to a person, whether or not actual harm is inflicted.

Trespass

Unauthorized entry onto someone else's property, which can result in civil or criminal legal action.