A Firm Requires an Investment of $25,000 and Will Return

question 12

Multiple Choice

A firm requires an investment of $25,000 and will return $36,500 after 1 year. If the firm borrows $20,000 at 7%, what is the return on levered equity?

• A) 162%
• B) 202%
• C) 242%
• D) 283%

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Definitions:

Maximize Profits

The process of making the highest possible profit from business operations.

Relatively Inelastic

Describes a situation where the demand or supply of a good or service changes minimally in response to changes in price.

Marginal Cost Curve

A graphical representation that shows how the cost of producing one additional unit of a good changes as production volume increases.

Marginal Revenue Curve

A graphical representation showing how a firm's revenue changes with each additional unit of output sold, typically declining in perfectly competitive markets.