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4. A pretzel manufacturer is considering buying another pretzel-making machine that costs $100,000. The machine will depreciate by 8% per year. It will generate real profits equal to $18,000 next year, $18,000 (1 − 8%) two years from now (that is, the same real profits but adjusted for depreciation), $18,000 (1− 8%) 2 three years from now, and so on. Determine whether the manufacturer should buy the machine if the real interest rate is assumed to remain constant at each rate in (a) through (c). a. 5% b. 10% c. 15%.

4. A pretzel manufacturer is considering buying another pretzel-making machine that costs $100,000. The machine will depreciate by 8% per year. It will generate real profits equal to $18,000 next year, $18,000 (1 − 8%) two years from now (that is, the same real profits but adjusted for depreciation), $18,000 (1− 8%) 2 three years from now, and so on. Determine whether the manufacturer should buy the machine if the real interest rate is assumed to remain constant at each rate in (a) through (c). a. 5% b. 10% c. 15%.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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4. A pretzel manufacturer is considering buying another pretzel-making machine that costs $100,000. The machine will depreciate by 8% per year. It will generate real profits equal to $18,000 next year, $18,000 (1 − 8%) two years from now (that is, the same real profits but adjusted for depreciation), $18,000 (1− 8%) 2 three years from now, and so on. Determine whether the manufacturer should buy the machine if the real interest rate is assumed to remain constant at each rate in (a) through (c). a. 5% b. 10% c. 15%.

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