Let us suppose, a company has 1 million outstanding shares of stock, each valued at 25$. Let us also suppose that the replacement cost of its physical capital stock is 18 million $. a. Should this firm invest in more physical capital? b. Would your answer in part (a) change, if the replacement cost of its physical capital stock changes to 28 million $?
Let us suppose, a company has 1 million outstanding shares of stock, each valued at 25$. Let us also suppose that the replacement cost of its physical capital stock is 18 million $. a. Should this firm invest in more physical capital? b. Would your answer in part (a) change, if the replacement cost of its physical capital stock changes to 28 million $?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Let us suppose, a company has 1 million outstanding shares of stock, each valued at 25$. Let us also suppose that the replacement cost of its physical capital stock is 18 million $.
a. Should this firm invest in more physical capital?
b. Would your answer in part (a) change, if the replacement cost of its physical capital stock changes to 28 million $?
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