The classical dichotomy is the separation of real and nominal variables. The following questions test your understanding of this distinction.

Rina spends all of her money on comic books and beignets. In 2011 she earned $14.00 per hour, the price of a comic book was $7.00, and the price of a beignet was $2.00.
Which of the following give the nominal value of a variable? Check all that apply.
__ Rina's wage is 2 comic books per hour in 2011.
__The price of a beignet is $2.00 in 2011.
__ Rina's wage is $14.00 per hour in 2011.
Which of the following give the real value of a variable? Check all that apply.
__Rina's wage is $14.00 per hour in 2011.
__The price of a comic book is 3.5 beignets in 2011.
__Rina's wage is 7 beignets per hour in 2011.
Suppose that the Fed sharply increases the money supply between 2011 and 2016. In 2016, Rina's wage has risen to $28.00 per hour. The price of a comic book is $14.00 and the price of a beignet is $4.00.
In 2016, the relative price of a comic book is ( 0.29 beignets, 3.5 beignets, $4.00, $14.00)
Between 2011 and 2016, the nominal value of Rina's wage (decreases, increases, remains the same) and the real value of her wage(decreases, increases, remains the same) .
Monetary neutrality is the proposition that a change in the money supply (does not affect, affect) nominal variables and ( does not affect, affect) real variables.

The cost of capital: introduction the cost of capital: introduction companies issue bonds, preferred stock, and common equity to aise capital to invest in capital budgeting projects. capital is』necessary factor of production and like any other factor, it has a cost. this cost is equal to the select the applicable security. the rates of return that investors require on bonds, preferred stocks, and common equity represent the costs of those securities to the firm. companies estimate the required returns on their securities, calculate a weighted average of the costs of their different types of capital, and use this average cost for capital budgeting purposes. required return on rate: when calculating om operations when the firm's primary financial objective is to select shareholder value. to do this, companies invest in projects that earnselect their cost of capital. so, the cost of capital is often referred to as the -select -select and accruals, which a se spontaneously we hted average cost of capital wa c our concern is with capital that must be provided by select- 쑤 interest-bearing debt preferred stock and common equity. capital budgeting projects are undertaken, are not included as part of total invested capital because they do not come directly from investors. which of the following would be included in the caculation of total invested capital? choose the response that is most correct a. notes payable b. taxes payable c retained earnings d. responses a and c would be included in the calculation of total invested capital. e. none of the above would be included in the cakulation of total invested capital.

Frolic corporation has budgeted sales and production over the next quarter as follows. the company has 4100 units of product on hand at july 1. 10% of the next months sales in units should be on hand at the end of each month. october sales are expected to be 72000 units. budgeted sales for september would be: july august september sales in units 41,500 53,500 ? production in units 45,700 53,800 58,150

The common stock and debt of northern sludge are valued at $65 million and $35 million, respectively. investors currently require a return of 15.9% on the common stock and a return of 7.8% on the debt. if northern sludge issues an additional $14 million of common stock and uses this money to retire debt, what happens to the expected return on the stock? assume that the change in capital structure does not affect the interest rate on northern’s debt and that there are no taxes.