Scenario 20

question 11

Multiple Choice

Scenario 20.1 Suppose labor productivity differences are the only determinants of comparative advantage,and Brazil and Chile both produce only coffee and sugar.In Chile,either 5 units of coffee or 2 units of sugar can be produced in one day.In Brazil,a day of labor produces either 2 units of coffee or 1 unit of sugar.
-Refer to Scenario 20.1.What is the opportunity cost of producing coffee in Chile?

• A)Half a pound of sugar
• B)Two-fifth of a pound of sugar
• C)2 pounds of sugar
• D)One-third of a pound of sugar
• E)4 pounds of sugar

Explain the importance of flotation costs and their impact on capital component costs and WACC.

Describe the adjustements made to dividend costs to account for flotation expenses.

Understand the fundamental concepts of the Capital Asset Pricing Model (CAPM) and its role in calculating a firm's cost of equity.

Recognize the importance of using an appropriate discount rate, specifically the weighted average cost of capital (WACC), in evaluating investment projects, including adjustments for project risk.

---

Definitions:

Carbonic Anhydrase

An enzyme that helps regulate pH and fluid balance by catalyzing the conversion between carbon dioxide and water to bicarbonate and protons.

Bicarbonate Ion

A negatively charged ion (HCO3-) that is a significant component of the bicarbonate buffering system in the blood.

Hemolysis

Destruction of red blood cells in such a manner that hemoglobin is released.

Erythrocyte

Red blood cell; biconcave disk containing hemoglobin.