(21) A firm just purchased a new machine which costs $1000 in real dollars and plan to depreciate the machine at a rate of 25% each year. The firm can borrow money from the bank at a nominal rate of 8%, or receive a nominal rate of 3% for depositing money at the bank. The expected inflation rate in the coming year is 2%. The firm borrowed money from the bank to purchase the machine. The firm's user cost of capital for the first year is (A) $250 (B) $260 (C) $280 (D) 6010

(21) A firm just purchased a new machine which costs $1000 in real dollars and plan to depreciate the machine at a rate of 25% each year. The firm can borrow money from the bank at a nominal rate of 8%, or receive a nominal rate of 3% for depositing money at the bank. The expected inflation rate in the coming year is 2%. The firm borrowed money from the bank to purchase the machine. The firm's user cost of capital for the first year is (A) $250 (B) $260 (C) $280 (D) 6010

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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