Physical Capital Differences Across Countries Can Be Seen in the Fact

question 156

Multiple Choice

Physical capital differences across countries can be seen in the fact that

• A) more advanced economies typically have more sophisticated technology.
• B) furniture factories in China use machines like those in North Carolina.
• C) students in India study the same subjects as those in the United States.
• D) advanced economies produce 53 percent of the world's income.
• E) the iPhone's components are produced in 30 countries.

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Definitions:

Financial Risk

The possibility of losing money on an investment or business venture, including risks related to currency, interest rates, and solvency.

Debt/Equity Ratio

A ratio exemplifying the balance of equity to debt in the financing structure for a company’s assets.

Interest Tax Shield

A deduction allowed for the interest paid on debt, thereby reducing taxable income and the total tax owed.

M&M Proposition I

outlines that in a perfect market, without taxes and transaction costs, a company's value is unaffected by its capital structure.