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Naily [24]
3 years ago
15

Your buddy in mechanical engineering has invented a money machine. The main drawback of the machine is that it is slow. It takes

one year to manufacture $ 200. ​However, once​ built, the machine will last forever and will require no maintenance. The machine can be built​ immediately, but it will cost $ 2 comma 000 to build. Your buddy wants to know if he should invest the money to construct it. If the interest rate is 11.5 % per​ year, what should your buddy​ do?
Business
1 answer:
sergey [27]3 years ago
5 0

Answer: He should decline production of the machine.

Explanation:

Analyzing the problem, we can determine if he should proceed or not by calculating the Net present value. That is present value of the machine in terms of perpetuity as it will be used forever and the cost incurred in its production.

Given the following ;

To manufacture $200 = 1 year, meaning

Amount or yearly payment = $200

Cost of machine = $2,000

Interest rate(r) = 11.5% = 0.115

Recall;

Present the value if perpetuity ;

(Payment per period ÷ rate)

= $200 ÷ 0.115 = $1739.13

Net present value = $1,739.13 - $2000 = - 260.87

Given the negative value of NPV, the cost outweighs the benefit, hence, he should decline.

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Answer:

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6 0
3 years ago
What fact or facts support a situation where trade is advantageous?
DedPeter [7]

What fact or facts support a situation where trade is advantageous?

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8 0
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Bette and Jamal are partners at a management consulting firm.
kodGreya [7K]

Answer:

Jamal

Explanation:

Given that

Number of required slides = 50 slides

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Bill amount per hour = $750

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= Bill amount per hour ÷ creating slides per hour

= $750 ÷ 15 per hour

= $50

For making 50 slides, the opportunity cost would be

= $50 × 50 slides

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= $35

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4 0
3 years ago
The simple rate of return focuses on accounting net operating income rather than on cash flows. Group starts
jeka94

Simple returns focus on accounting for net operating income, not cash flow. The simple method of revenue focuses on cash flow rather than accounting for net operating income.

A simple rate of return is calculated by subtracting the initial value of the investment from the current value and dividing it by the initial value. To output as%, multiply the result by 100.

Under the simple rate of return method, a dollar you receive 10 years later is considered to be worth the $ 1 you receive today. Therefore, the simple yield method can be misleading if the alternative cash flow patterns under consideration are different.

Learn more about cash flows at

brainly.com/question/735261

#SPJ4

<em>Your question is incomplete. please read below to find the full content.</em>

The Simple Rate Of Return Focuses On Accounting Net Operating Income Rather Than On Cash Flows.

A) TRUE

B) FALSE

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2 years ago
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