Mason5114 Mason5114

20-05-2018
Business

contestada

Suppose a firm is considering the purchase of a machine which when used will increase its total revenues by $10,000 for the year. the machine costs $8,000 and has a useful life of one year. the interest rate is 20 percent. this investment should:
a. not be undertaken because the rate of return is 7 percent less than the interest rate
b. be undertaken because the rate of return is 5 percent greater than the interest rate
c. be undertaken because the rate of return is 2 percent greater than the interest rate
d. be undertaken because the rate of return is 7 percent greater than the interest rate

Respuesta :

prasanna2 prasanna2

20-05-2018

machine cost = 8000
depreciation=8000
Revenue increase = 10000
net revenue increase = 10000 minus 8000= 2000
rate of return= 2000÷8000= 0.25 = 25 percent
interest rate = 20%
Thus I guess you know your answer now

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