B.5 Diseconomies of scale occur when long run average cost is decreasing. B.6 A supplementary product will be economical to produce even with a very low relative price. B.7 In regression analysis, the F-test is used to evaluate the explanatory power of all of the independent variables.
3 C. Net Present Value. The chart at the bottom of the page shows the net present values of three projects (A, B and C) as a function of the interest rate. [16 Points] C.1 Discuss the profitability of each project with respect to both the net present value and the internal rate of return over the range of interest rates (costs of capital) shown. C.2 Discuss the ranking of the three projects with respect to both the net present value and the internal rate of return over the range of interest rates (costs of capital) shown. NPV B NPV C NPV A -10,000 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 Net Present Value Interest Rate