A Manufacturing Company Is Thinking About Building a New Factory

question 12

Multiple Choice

A manufacturing company is thinking about building a new factory.The factory,if built,will yield the company $300 million in 7 years,and it would cost $220 million today to build.The company will decide to build the factory if the interest rate is

• A)no less than 4.53 percent.
• B)no greater than 4.53 percent.
• C)no less than 5.81 percent.
• D)no greater than 5.81 percent.

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Definitions:

Extra Income Effect

The change in an individual's consumption choices resulting from a change in real income, due to factors other than a direct income increase.

Endowment

The total resources available to an individual or entity, which can include wealth, assets, or resources in an economic context.

Normal Good

A type of good for which demand increases as the income of individuals increases, holding everything else constant.

Wage Rate

The standard amount of compensation given to employees for services rendered, usually expressed per hour or year.