A company that produces baseball gloves is considering buying some new equipment that it expects will increase future profits.If the interest rate rises,then the present value of these future profits
A)rises.The company is more likely to buy the equipment.
B)rises.The company is less likely to buy the equipment.
C)falls.The company is more likely to buy the equipment.
D)falls.The company is less likely to buy the equipment.

Question

Quizplus · Accepted Answer

When the interest rate rises, the present value of future profits falls because the higher interest rate makes it more expensive to finance the purchase of the new equipment. Therefore, the company is less likely to buy the equipment.

A Company That Produces Baseball Gloves Is Considering Buying Some