Final answer:
It is true that initial costs, as well as operating and maintenance costs of capital goods, influence the expected rate of return on investment. Factors such as expectations of future profits and interest rates are key in investment decisions. Rates of return against investment risks are also crucial in allocating financial capital.
Step-by-step explanation:
The statement that initial costs of capital goods, and the estimated costs of operating and maintaining those goods, affect the expected rate of return on investment is true. Expectations of future profits are a crucial factor driving investment decisions, as well as the interest rates associated with financing these investments. When businesses project economic growth, confidence in market expansion leads to increased investment. Conversely, during economic downturns or recessions, investment levels tend to decline. Additionally, the interest rates influence the cost of investment, representing an opportunity cost for the capital deployed. Lower rates encourage investment by reducing the cost of borrowing, while higher rates deter investment due to the increased cost of capital.
The decision-making in financial investments involves evaluating the rate of return against the risk involved. When alternatives present different risk-return profiles, financial capital tends to flow towards investments with a more favorable balance, as evidenced by shifts in the supply curves of financial capital for respective investments.