Exam 8: Rents, profits, and the Financial Environment of Business

The ABC Corporation earned a real rate return of 4.5 percent on an investment.In the economy,the nominal rate of interest was 6 percent and the rate of inflation was 3 percent.We can conclude that

A proprietorship is

Amber has opened a coffee shop for many years on a piece of land that she has also owned.She has also made accounting profits from the coffee shop.This year,rents in the area rose considerably,and Amber responded by deciding to sell the land and the coffee shop to an apartment builder.How can you explain Amber's decision to sell her business?

If the present value of $110 to be received one year from now is $100,what will $100 be worth two years from now?

Describe and explain the three principle methods of financing used by corporations.

Suppose the auto industry has several investment projects with an expected rate of return of 15 percent,the aluminum industry has projects with an expected return of over 20 percent,the publishing industry projects with an expected return of 10 percent,the steel industry has projects with an expected return of 7 percent and the rubber industry projects with an expected return of 5 percent.The current market rate of interest is 7 percent.A reduction in the supply of funds causes interest rates to rise to 11 percent.The effect is to

-Refer to the above figure.If demand curve $\mathrm { D } _ { 1 }$ is the relevant demand curve,rent is

Economic profits are equal to

By definition,a firm is

The interest rate used to bring future sums back to present value is

A payment for the use of any resource over and above its opportunity cost is called

Superstars in sports or entertainment presumably would be willing to continue working in their specific areas for lower income than they are currently earning.This implies that

Interest rates are positive because

The nominal rate of interest is

The greater the interest rate,

Discuss the advantages and disadvantages of proprietorships.

Another term for the opportunity cost of capital is

Which of the following characteristics is NOT likely to increase the interest on a loan?

A popular entertainer gives a concert in a 50,000 seat stadium.To give her fans a break,she charges only $50 a seat instead of the customary $75 a seat.At $75 a ticket,there would have been 50,000 tickets sold,and at $50,there are 80,000 people who want tickets.As a consequence of the generosity of the entertainer,

If the interest rate is 5 percent per year and you borrow $100 for one year,at the end of the year you must pay back