Cytnhia owns antique furniture that she bought for $20000 five ago. cost of owning the furniture for the next year. To compute
the cost, you need two bits of information: A. the interest rates for the last fivefive years and the expected interest rate for the next year.
B. the expected interest rate for the next year and the current value of the furniture.
C. the interest rates for the last fivefive years and the current value of the furniture.
D. the expected interest rate for the next year and the cost of comparable new furniture.
The correct answer is B. the expected interest rate for the next year and the current value of the furniture.
Explanation:
To compute the cost of owning the furniture for the next year we need 2 bits of information, the expected interest rate for the next year and the current value of the furniture.
As we need the cost of the next year, we don´t care about the interest we pay in the past. We need what we have to pay in the future.
And also , we need the current value of the antique furniture so we can know the cost of opportunity of running the antique furniture. ( If we don´t run this business , what can we do with that money?)
Based on the information provided within the question it can be said that this seems to be an example of upward distortion. In the context of business, this refers to when a lower employee fails to, or is hesitant to communicate negative information to his/her superiors due to the consequences. Which is what Enrique is doing in this scenario.
