Firms decide how much to invest by comparing the rate of return on their projects with:
A) their total profit.
B) the productivity of the workers assigned to the projects.
C) the interest rate.
D) before-tax rate of return.

Question

Quizplus · Accepted Answer

Firms evaluate the rate of return on their projects and compare it with the interest rate. They will only invest in projects that have a higher rate of return than the interest rate, as they want to earn a profit on the investment.

Firms Decide How Much to Invest by Comparing the Rate