As the president of your firm, you are considering the purchase of a new piece of machinery. The machine is expected to increase profits by $5,000 per year for five years. After that, the machine will have no value
If the machine costs $22,000 and the market rate of interest is 5 percent, should your firm purchase the machine? Explain.
No. The present value of the income stream is ($5,000/1.05) + ($5,000/1.1025) + ($5,000/1.157625) + ($5,000/1.2155063) + ($5,000/1.2762816) = $4,761.90 + $4,535.15 + $4,319.19 + $4,113.51 + $3,917.63 = $21,647.38 . Since the cost of the machine is greater than the present value of the income stream, the machine should not be purchased.
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If a firm has established monitoring devices that have a 50% chance of detecting shirking, and an employee gains $5,000 from shirking, the employer can deter shirking by having employees post a bond equal to
A) $2,500. B) $5,000. C) $10,000. D) $50,000.
According to Edward Chamberlin, is the "differentness" of products a waste of resources? Explain
What will be an ideal response?