Project Delay Prescott Labs is considering developing a defibrillator product. You know that will require extensive testing and possible modification before it can be launched. Still, you know that even if it is launched two years from now, the present
value of sales over the expected 10 year product lifecycle will cover these costs. But now the boys down at the lab tell you that it may not launch for three years. How does this affect your assessment of going ahead with funding the product?
The delay probably implies additional costs. Even if the delay does not affect development costs, it does push the benefits further into the future. The present value of the benefits falls as each year's income gets discounted more. Both of these effects will tend to reduce the net present value of the project, making it less likely to be profitable.
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According to Joseph Schumpeter, the theory of creative destruction describes a process by which
A) some new products unleash a gale of destruction that drive other new products out of the market. B) the creation of new products never involves the destruction of old products. C) new products unleash a gale of destruction that drives old products out of the market. D) new products are created by the destruction of capital.
If more firms enter the telecommunications industry, we can expect the equilibrium price of telecom services to decrease and the equilibrium number of services to increase
a. True b. False Indicate whether the statement is true or false
Suppose that Trey spends all of his income on vacation trips and textbooks. If the price of a trip is $200 and the price of a textbook is $50, then the slope of his budget line (assuming vacation trips are measured on the vertical axis) would be
a. -4 b. 4 c. 0.25 d. -1.75 e. -0.25
During the financial crisis of 2007-2009 the interest rate on mortgage-backed securities had
a. increased and the Treasury interest rate had risen. b. increased and the Treasury interest rate had fallen. c. decreased and the Treasury interest rate had risen. d. decreased and the Treasury interest rate had fallen.