The Value of the Firm Decreases with a Decrease In

question 20

Multiple Choice

The value of the firm decreases with a decrease in:

• A) total revenue.
• B) the discount rate.
• C) the cost of capital.
• D) total cost.

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Definitions:

Accounting Profits

The net income for a company calculated by subtracting total expenses from total revenues, according to standard accounting practices.

Explicit Costs

Direct, out-of-pocket payments for inputs or resources used in the production of goods or services.

Uninsurable Risk

An eventuality for which the frequency or magnitude of potential losses is unpredictable or unknowable. Insurance companies are not willing to sell insurance against such risks.

Consumer Tastes

The preferences and inclinations of consumers regarding different products and services, which can shift over time affecting market demand.