Assume the real interest rate is still 10%. If the firm from the previous question (question 3) can buy that piece of machinery that will generate the given profit stream for the next 5 years for $8,000 today, should the firm invest in the machinery? A. Do not invest in the machinery. B. Invest in the machinery.
Assume the real interest rate is still 10%. If the firm from the previous question (question 3) can buy that piece of machinery that will generate the given profit stream for the next 5 years for $8,000 today, should the firm invest in the machinery? A. Do not invest in the machinery. B. Invest in the machinery.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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4. Assume the real interest rate is still 10%. If the firm from the previous question (question 3) can buy that piece of machinery that will generate the given profit stream for the next 5 years for $8,000 today, should the firm invest in the machinery?
A. Do not invest in the machinery.
B. Invest in the machinery.
Transcribed Image Text:Question 3
PDV =
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Assume that the real interest rate is 10%. A firm can invest in a piece of machinery that will provide a profit
stream of $777.77 at the end of year 1, $1,865.35 at the end of year 2, $3,586.27 at the end of year 3,
$2,369.13 at the end of year 4, and $591.31 at the end of year 5. Fill in the missing values (in chronological
order, starting with year 1) using the above equation and solve. Again, due to formatting issues in Blackboard
Ultra, the following text is not correctly displayed.
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Do NOT enter the "$" in your responses; round all dollar values to the closest cent. Do NOT round the values
in the denominator.
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$Blank 1 $Blank 2 $3,586.27 $Blank 3 $Blank 4 PDV
$Blank 5 Blank 6 1.21 Blank 7 Blank 8 Blank 9
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$3,586.27
1.21
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Add your answer
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= Blank 5
+
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