2. The local pizzeria is considering buying a new pizza oven. The oven maker costs $5,000. It is expected to generate profits of $250 per year every year forever (in other words, using the language of the neoclassical investment model, the marginal product of capital is 5%). It depreciates in value by 3 percent per year. What is the maximum value of the interest rate for which it would be profitable for the bakery to buy the machine?

2. The local pizzeria is considering buying a new pizza oven. The oven maker costs $5,000. It is expected to generate profits of $250 per year every year forever (in other words, using the language of the neoclassical investment model, the marginal product of capital is 5%). It depreciates in value by 3 percent per year. What is the maximum value of the interest rate for which it would be profitable for the bakery to buy the machine?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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