Economic rents * 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.

Question

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Answer 1

Textbook Question

Chapter 11, Problem 1PS

Economic rents* 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.

a)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

When a firm earns the opportunity cost of capital is not comes under the earning economic rents because economic rents are profits which will be more than to cover the cost of capital.

Person X views that it earning opportunity cost of capital is earning economic rents is false.

b)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given a firm which invests in positive net present value ventures expects to earn economic rents.

Person X views that it is true, whenever a firm expects to invest in a positive-NPV projects to earn economic rents.

c)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Financial managers seeks to identify the areas where firms can earn economic rents.

Person X views that, it is true, firm’s financial manager tries to identify the areas where there is an economic rents because there should be positive net present value.

d)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given, economic rent is equivalent to annual cost of operating capital equipment.

Person X views that it is false, economic rents are earned by companies, when it has a special competitive advantage over its competitors.

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Students have asked these similar questions

1. The Net Present Value decision technique may not be the only pertinent unit of measure if the firm is facing A. a labor union. B. a major investment. C. time or resource constraints. D. the election of a new board of directors. 2. Which rate-based decision statistic measures the rate of return, including the cost of capital for a project? A. Profitability Index, PI B. Net Present Value, NPV C. Internal Rate of Return, IRR D. Modified Internal Rate of Return, MIRR 3. When looking at these types of projects, one must consider any cash flows that arise from installing the new equipment. A. new B. cost-cutting C. incremental D. replacement E. all of the above. 4. Of the capital budgeting techniques discussed, which works equally well with normal and non-normal cash flows and with independent and mutually exclusive project? A. payback period B. net present value C. discounted payback period D. modified internal rate of return 5. The approach to convert an infinite series of asset…

The cost of capital is: the required rate of return for new projects that have risk that is similar to that of the overall firm. the rate of return a firm earns on its investments to satisfy the required rate of return for the firm’s investors. the opportunity cost of using funds on projects. all of the above.

The duration of time within which the investment made for the project will be recovered by the net returns of the project is known as а. Accounting rate of return method b. Payback period С. Net present value method d. Period of return Capital budgeting is the process of evaluating and selecting short-term investments that are consistent with the firm's goal of maximizing owners' wealth. Select one: True False

Answer 2

Textbook Question

Chapter 11, Problem 1PS

Economic rents* 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.

a)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

When a firm earns the opportunity cost of capital is not comes under the earning economic rents because economic rents are profits which will be more than to cover the cost of capital.

Person X views that it earning opportunity cost of capital is earning economic rents is false.

b)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given a firm which invests in positive net present value ventures expects to earn economic rents.

Person X views that it is true, whenever a firm expects to invest in a positive-NPV projects to earn economic rents.

c)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Financial managers seeks to identify the areas where firms can earn economic rents.

Person X views that, it is true, firm’s financial manager tries to identify the areas where there is an economic rents because there should be positive net present value.

d)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given, economic rent is equivalent to annual cost of operating capital equipment.

Person X views that it is false, economic rents are earned by companies, when it has a special competitive advantage over its competitors.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Textbook Question

Chapter 11, Problem 1PS

Economic rents* 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.

a)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

When a firm earns the opportunity cost of capital is not comes under the earning economic rents because economic rents are profits which will be more than to cover the cost of capital.

Person X views that it earning opportunity cost of capital is earning economic rents is false.

b)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given a firm which invests in positive net present value ventures expects to earn economic rents.

Person X views that it is true, whenever a firm expects to invest in a positive-NPV projects to earn economic rents.

c)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Financial managers seeks to identify the areas where firms can earn economic rents.

Person X views that, it is true, firm’s financial manager tries to identify the areas where there is an economic rents because there should be positive net present value.

d)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given, economic rent is equivalent to annual cost of operating capital equipment.

Person X views that it is false, economic rents are earned by companies, when it has a special competitive advantage over its competitors.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Textbook Question

Chapter 11, Problem 1PS

Economic rents* 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.

a)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

When a firm earns the opportunity cost of capital is not comes under the earning economic rents because economic rents are profits which will be more than to cover the cost of capital.

Person X views that it earning opportunity cost of capital is earning economic rents is false.

b)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given a firm which invests in positive net present value ventures expects to earn economic rents.

Person X views that it is true, whenever a firm expects to invest in a positive-NPV projects to earn economic rents.

c)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Financial managers seeks to identify the areas where firms can earn economic rents.

Person X views that, it is true, firm’s financial manager tries to identify the areas where there is an economic rents because there should be positive net present value.

d)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given, economic rent is equivalent to annual cost of operating capital equipment.

Person X views that it is false, economic rents are earned by companies, when it has a special competitive advantage over its competitors.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Textbook Question

Answer 6

Textbook Question

Answer 7

a)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

When a firm earns the opportunity cost of capital is not comes under the earning economic rents because economic rents are profits which will be more than to cover the cost of capital.

Person X views that it earning opportunity cost of capital is earning economic rents is false.

b)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given a firm which invests in positive net present value ventures expects to earn economic rents.

Person X views that it is true, whenever a firm expects to invest in a positive-NPV projects to earn economic rents.

c)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Financial managers seeks to identify the areas where firms can earn economic rents.

Person X views that, it is true, firm’s financial manager tries to identify the areas where there is an economic rents because there should be positive net present value.

d)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given, economic rent is equivalent to annual cost of operating capital equipment.

Person X views that it is false, economic rents are earned by companies, when it has a special competitive advantage over its competitors.

Answer 8

a)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

When a firm earns the opportunity cost of capital is not comes under the earning economic rents because economic rents are profits which will be more than to cover the cost of capital.

Person X views that it earning opportunity cost of capital is earning economic rents is false.

Answer 9

a)

Expert Solution

Answer 10

a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Answer 13

Explanation of Solution

When a firm earns the opportunity cost of capital is not comes under the earning economic rents because economic rents are profits which will be more than to cover the cost of capital.

Person X views that it earning opportunity cost of capital is earning economic rents is false.

Answer 14

b)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Given a firm which invests in positive net present value ventures expects to earn economic rents.

Person X views that it is true, whenever a firm expects to invest in a positive-NPV projects to earn economic rents.

Answer 15

b)

Expert Solution

Answer 16

b)

Expert Solution

Answer 17

Expert Solution

Answer 18

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Answer 19

Explanation of Solution

Given a firm which invests in positive net present value ventures expects to earn economic rents.

Person X views that it is true, whenever a firm expects to invest in a positive-NPV projects to earn economic rents.

Answer 20

c)

Expert Solution

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Explanation of Solution

Financial managers seeks to identify the areas where firms can earn economic rents.

Person X views that, it is true, firm’s financial manager tries to identify the areas where there is an economic rents because there should be positive net present value.

Answer 21

c)

Expert Solution

Answer 22

c)

Expert Solution

Answer 23

Expert Solution

Answer 24

Summary Introduction

To discuss: Whether items are true or false on the bases of economic rents.

Answer 25

Explanation of Solution

Financial managers seeks to identify the areas where firms can earn economic rents.

Person X views that, it is true, firm’s financial manager tries to identify the areas where there is an economic rents because there should be positive net present value.