23. Joe's Build Back Better (BBB) Ammo Corp has $15 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the interest rate has increased. How does this influence the company's decision, assuming the alternative to investing in a factory is loaning the money out? (A) It doesn't, since the company's shareholders are expecting a new factory. (B) It is more likely to build the factory because a higher interest rate makes the factory more valuable. (C) It is less likely to build the factory, since the opportunity cost of using the funds to build a factory rises with a higher interest rate. (D) It doesn't influence their decision, since the company does not need to borrow money to build the factory.

23. Joe's Build Back Better (BBB) Ammo Corp has $15 million in cash, which it has accumulated from retained earnings. It was planning to use the money to build a new factory. Recently, the interest rate has increased. How does this influence the company's decision, assuming the alternative to investing in a factory is loaning the money out? (A) It doesn't, since the company's shareholders are expecting a new factory. (B) It is more likely to build the factory because a higher interest rate makes the factory more valuable. (C) It is less likely to build the factory, since the opportunity cost of using the funds to build a factory rises with a higher interest rate. (D) It doesn't influence their decision, since the company does not need to borrow money to build the factory.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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