Which of the following is not true of the terms of trade?
a. They are determined by supply and demand factors.
b. They lie somewhere between the opportunity costs of the trading partners.
c. GATT begins negotiations on the terms of trade.
d. They depend on negotiations between trade partners.
e. They often favor one partner more than the other.
C
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You manage a new product development team for an electronics manufacturer, and your firm's policy is that all new projects must pay for themselves in the first five years
Your team has projected that the first year of the project requires an initial investment of $2 million with no revenue, the second year loss is $500,000, the net revenue for year 3 is zero, and you earn $1.8 million in both year 4 and year 5. If the opportunity cost of capital for your firm is 8%, should you go ahead with this project? A) No, the expected NPV is negative B) Yes, the expected NPV is roughly $290,000 C) Yes, the expected NPV is $1.1 million D) We do not have enough information to answer this question.
In a democratic setting, debt financing is attractive to elected political officials because
a. it makes it possible for them to spend on current projects favored by their constituents without having to levy current taxes. b. it drives up interest rates, which encourages saving. c. it leads to higher taxes in the future, which will tend to slow economic growth. d. it makes the cost of government more visible, which will help voters allocate government spending more efficiently.