The president of XYZ, Incorporated is considering the purchase of new equipment. The equipment is expected to increase profits by $25,000 per year for four years. After that, the equipment will have no value
If the machine costs $80,000 and the market rate of interest is 6 percent, should your firm purchase the machine? Explain.
Yes. The present value of the income stream is ($25,000/1.06) + ($25,000/1.1236) + ($25,000/1.191016) + ($25,000/1.262477) = $23,584.91 + $22,249.91 + $20,990.48 + $19,802.34 = $86,627.64 . Since the cost of the equipment is less than the present value of the income stream, the equipment should be purchased.
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If you have $1,000 in wealth and the price level increases by 20 percent, then
A) the $1,000 will buy fewer goods and services. B) the $1,000 dollars will buy 20 percent more goods and services. C) the real value of the $1,000 increases. D) you will be able to buy fewer goods, but the real value of those goods will increase.
Lectures in microeconomics can be delivered either by an instructor (labor) or a movie (capital) or any combination of both. Yet the it gets harder and harder to substitute more movies for an instructor the more movies are already used
Which graph in the above figure best represents the isoquants for lectures in microeconomics when Capital per day is on the vertical axis and Labor per day is on the horizontal axis? A) Graph A B) Graph B C) Graph C D) Graph D