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You Are Thinking About Building a New Mall

Question 51

Multiple Choice

You are thinking about building a new mall.Your economic consultants say the mall will bring a 7% rate of return.Because you know that you can borrow money for 5%:


A) you will build the mall if it costs $50 million but not if it costs $100 million.
B) assuming conditions don't change, you will build the mall no matter how much it costs.
C) if the rate of return falls below 5%, you will still build the mall.
D) assuming conditions don't change, you will not build the mall because a 2% net rate of return is just too small to be worth it.
E) if the cost of borrowing rises to 8%, you would still build the mall.

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