When buying a piece of equipment, it is always best for the firm to pay cash instead of borrowing the funds since this renders the equipment less costly

Indicate whether the statement is true or false

False. It depends. The opportunity cost of the capital when paying cash is the interest the firm receives on its cash reserves. This is an implicit cost. The opportunity cost of the capital when the funds are borrowed is the interest the firm must pay to the lender. This is an explicit cost. If the rate the firm receives on its cash reserves exceeds the rate at which it borrows, the firm is better off borrowing the funds to buy the equipment.

Economics

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Insurance companies do NOT cover losses that would

A) happen to all of the policyholders at once. B) happen with a very low probability. C) happen to just a handful of policyholders. D) happen with uncertainty.

Economics

A supply schedule shows the specific quantities of a good that suppliers are willing and able to

a. supply as long as there is a complementary demand b. produce at different costs c. supply at different quantities d. supply at different prices e. supply

Economics