General Semiconductor Is a European-Based Designer and Manufacturer of Semiconductors

question 67

Multiple Choice

General Semiconductor is a European-based designer and manufacturer of semiconductors.It manufactures semiconductors in fixed-asset intensive plants.The moderate fraction of its total assets that are property, plant, and equipment results from depreciating its technology-intensive manufacturing facilities over periods as short as four years.Which of the following is/are true?

• A)General Semiconductor has small long-term debt and debt-equity ratios.
• B)General Semiconductor incurs substantial technology risk from product obsolescence, with product life cycles of less than two years.
• C)Heavy reliance on debt financing would add financing risk and thereby increase borrowing costs even more.
• D)All of the above are true.
• E)none of the above

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Definitions:

Cournot Duopolists

Firms in a duopoly market structure where each firm chooses its quantity to produce based on the quantity chosen by its competitor, following the Cournot assumption.

Marginal Cost

The charge for producing another unit of a good or service.

Demand Curve

An illustrative chart that depicts how the demand for a product varies with changes in its price.

Total Costs

The overall expenditure on the production of goods or services, covering both fixed and variable costs.