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Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. If the firm finds it can borrow funds at an interest rate of 10 percent, the firm should Multiple Choice not purchase the machine, because the expected rate of return exceeds the interest rate. not purchase the machine, because the interest rate exceeds the expected rate of return. purchase the machine because the expected rate of return exceeds the interest rate. purchase the machine because the interest rate exceeds the expected rate of return.
Transcribed Image Text:Assume a machine that has a useful life of only one year costs $2,000. Assume, also, that net of such operating costs as power, taxes, and so forth, the additional revenue from the output of this machine is expected to be $2,300. If the firm finds it can borrow funds at an interest rate of 10 percent, the firm should Multiple Choice not purchase the machine, because the expected rate of return exceeds the interest rate. not purchase the machine, because the interest rate exceeds the expected rate of return. purchase the machine because the expected rate of return exceeds the interest rate. purchase the machine because the interest rate exceeds the expected rate of return.
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