Problem 1 (3 pts) - Concepts
a)Explain the concepts of fixed cost versus variable cost. Alsocontrast the concept of fixed cost to sunk cost.
b)Explain what “interest” is (in the financial sense). Brieflydiscuss the main reasons for interest being widely accepted andused in the modern economy.
c)Explain the concept of “capitalized worth”, relating it to theeconomic concept of “rent”.
d)Explain the “internal rate of return” by relating it to the PWof a project and the MARR. Also discuss its advantages as adecision metric and its shortcomings.
Interest xx a xxx xxxxx xx paid xy the xxxxxxxx xxx xxx use xxxxxxxxx party’s xxxxy. xxx xxxxxxxx who xxxxx loan xxx xxxxxxxxxxxxxx, xxx or xxx any xxxxx xxx xxxx, in xxxxxx they xxxx xx xxyxxxxxxxx for xxxxxxx money xx xxx xxxxxxxxx amount. xxxxxxxx iswidely xxxxxxxx xxx xxxx in xxxxxx economy xxxxxxx xxxxxxxy xx themoney xxxx in xxx xxxxxxx xxxxxxy is xxxxxxx by xxxxx xxxxx xyxxxxx. This xxxxy is xxxxxxx xy xxx monetary xxxxxy used xy xxxxxxxxxx xxxxx which xxxxxxxx setting xx xxx xxxxxxxx rates.
Capitalized xxxxx is x xxxxxx xxxxx is xxxx to xxxxxxxxx xxxxxxxxxx xxxxx of xxx revenues xxx xxxxxxxx xxx an xxxxxxxx periodof xxxx.