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Category > Business & Finance Posted 31 Jul 2017 My Price 9.00

a. A firm that earns the opportunity cost of capital is earning economic rents.

1. True or false?

a. A firm that earns the opportunity cost of capital is earning economic rents.

b. A firm that invests in positive-NPV ventures expects to earn economic rents.

c. Financial managers should try to identify areas where their firms can earn economic rents, because it is there that positive-NPV projects are likely to be found.

d. Economic rent is the equivalent annual cost of operating capital equipment.

2. Demand for concave utility meters is expanding rapidly, but the industry is highly competitive. A utility meter plant costs $50 million to set up, and it has an annual capacity of 500,000 meters. The production cost is $5 per meter, and this cost is not expected to change. The machines have an indefinite physical life and the cost of capital is 10%. What is the competitive price of a utility meter?

a. $5

b. $10

c. $15

 

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Homework Helper
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Status NEW Posted 31 Jul 2017 01:07 PM My Price 9.00

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