Explain what decisions and calculations a firm must make when it is considering the purchase of new capital (i.e., making an investment decision)
What will be an ideal response?
A firm must form expectations of future expected profits (per unit of capital). This implies that they must also form expectations of future output which are correlated with future profit. They must also form expectations of future interest rates to calculate present values. And finally, they must know the current price of the project and the rate of depreciation. Once they do all of this, they calculate the discounted present value of the project and compare that with its price.
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If the Fed lowers the federal funds rate, which of the following will NOT happen?
A) The real interest rate falls. B) Other short-term interest rates fall. C) Aggregate demand increases. D) Real GDP increases. E) The price level falls.
A proportional income tax is a tax for which the total amount paid does not increase with income
Indicate whether the statement is true or false
Refer to Figure 15-10. What is the area that represents consumer surplus under a monopoly?
A) the triangle P0P2E B) the trapezium P1P2EF C) the rectangle P1P3HF D) the triangle P0P1F
A tariff will decrease the supply of the product
a. True b. False Indicate whether the statement is true or false