Monday, February 29, 2016

Unit Three: Investment Demand

Investment Demand

Notes from 2/22/16

Investment?: Money Spent or Expenditures on:
     -New Plants (Factories)
     -Capital Equipment (Machinery)
     -Technology (Hardware and Software)
     -New Homes
     -Inventories (Goods Sold by Producers)

Expected Rates of Return
How do businesses make investment decisions?:
     -Cost/Benefit Analysis: How much is it going to cost me? What do I get out of it?

How do businesses determine the benefit?
     -Expected Rate of Return

How do businesses count the cost?
     -Interest Costs

How do businesses determine the amount of investment they undertake?
     -Compare expected rate of return
          -If Expected Return > Interest Cost THEN invest
          -If Expected Return < Interest Cost THEN DO NOT invest

No comments:

Post a Comment