An automobile company is planning to install inspection procedures to reduce the cost of repairs to new and used automobiles under warranty. Economic life is 10 years with a 25% rate of return, zero salvage value. How much money should be invested based on a rate of return analysis? Plan Equipment $ Annual labor cost $ Cost of car repairs $ Actual 1585000 A 1400000 40000 680000 B 1700000 50000 610000 C 1800000 60000 300000 D 2000000 70000 230000 E 2600000 80000 180000 3000000 85000 165000 LL F

Q: E12.10 (b)

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A: Present value of perpetuity is the value of an asset whose cash flow is received forever.

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Q: If

A: n(A) = 150n (B) = 150 (A ∪ B) = 210

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A:

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A:

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A: NPV = $300Initial investment = $900IRR = 14%

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A: Answer:

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Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.