Investment Decision Condition
A firm will invest in physical capital when the expected rate of return satisfies which of the following conditions?
A
It equals the risk‐free rate irrespective of market conditions.
B
It only exceeds the inflation rate, ensuring some increase in purchasing power.
C
It is lower than the nominal interest rate so that financing costs are minimized.
D
It is at least as high as the prevailing real interest rate.
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