The effect of an increase in the price level on aggregate demand is represented by a : a. shift to the right of the aggregate
The effect of an increase in the price level on aggregate demand is represented by a :
a. shift to the right of the aggregate demand curve.
b. shift to the left of the aggregate demand curve.
c. movement to the left along a given aggregate demand curve.
d. movement to the right along a given aggregate demand curve.
You are a member of a team responsible for the evaluation of investment proposals in a large multinational company that is quoted on a major stock exchange. The directors of one of the company's largest subsidiaries has proposed a major investment that would double that subsidiary's manufacturing capacity and would enable it to export to several new markets. The proposed investment would require the company to raise a great deal of money, either by borrowing or by the issue of equity. The amount involved is large enough to justify either a share issue or the sale of loan stock, but not a combination of the two. The proposal has been backed by a detailed analysis of the cash flows that are expected to arise from this expansion. The company has a policy of evaluating investment opportunities on the basis of the net present value (NPV) of estimated cash flows. (1) (a) Identify the factors that the company may use to determine the rate at which this proposal might be discounted; and (b) Explain which of these factors would be most relevant to this project. [6] (ii) Explain how the decision to raise finance using either loan stock or equity might affect the company's weighted average cost of capital (WACC). [8] (iii) It has been suggested that "political", or subjective, factors within companies are often more relevant to investment decisions than objective economic factors in deciding whether a project should proceed. Explain why this might be so. [6] [Total 20](i) Define in words the following single figure indices: the crude death rate the directly standardised mortality rate the standardised mortality ratio. (4] (ii) Two states, A and B, of a particular country have produced the following mortality data for a given time period: State A Age last birthday Deaths Central exposed to risk 0 - 19 75 40,000 20-59 1,175 80,000 60 - 100 2,600 60,000 Total 3,850 180,000 State B Age last birthday Deaths Central exposed to risk 0 - 19 150 30,000 20 -39 300 20,000 40- 59 375 15.000 60 - 100 600 10,000 Total 1,425 75,000 (a) Calculate the crude death rates and the standardised mortality ratios for the two areas, using ELT15 (Males) as the standard mortality basis, where appropriate. (For this purpose, you can assume that all lives in a particular age band are subject to the force of mortality applicable to the average age of that band.) (b) Comment on your results. [7] [Total 11]