Charlie's Utility Function Is X_Ax_B

question 14

Multiple Choice

Charlie's utility function is x_Ax_B.The price of apples used to be $1 per unit and the price of bananas was $2 per unit.His income was $40 per day.If the price of apples increased to $1.50 and the price of bananas fell to $1.75, then in order to be able to just afford his old bundle, Charlie would have to have a daily income of

• A)$23.75.
• B)$47.50.
• C)$96.
• D)$71.25.
• E)$190.

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Definitions:

Weighted Average Cost of Capital (WACC)

A calculation of a firm's cost of capital in which each category of capital is proportionately weighted, reflecting the expected cost of all sources of capital, including debt and equity.

Flotation Costs

Expenses incurred by a company in issuing new securities, typically including fees for underwriting, legal, registration, and other associated costs.

Debt-to-Assets Ratio

A leverage ratio that calculates the total amount of debt relative to the total amount of assets, indicating how much of the company's assets are funded by debt.

Cost of Equity

The rate of return that a company theoretically pays to its equity investors to compensate for the risk they undertake by investing in the company.