All of the Following Projects Have an Initial Cost of $10,000

question 59

Essay

All of the following projects have an initial cost of $10,000. Which are acceptable at a discount rate of 9%?
A) Purchase an oil painting which can be sold in 3 years for $12,000?
B) Purchase a delivery vehicle which will generate net inflows of $2,000 per year for five years and which will have a salvage value of $3,000 at the end of the 5th year?
C) Invest in a video store that will generate net inflows of $3,000 per year for 4 years and which can be sold at the end of the 4th year for $2,000?

• A) Purchase an oil painting which can be sold in 3 years for $12,000?
• B) Purchase a delivery vehicle which will generate net inflows of $2,000 per year for five years and which will have a salvage value of $3,000 at the end of the 5th year?
• C) Invest in a video store that will generate net inflows of $3,000 per year for 4 years and which can be sold at the end of the 4th year for $2,000?

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Definitions:

Marginal Unit

The additional unit of a good or service, used in economics to analyze the cost or benefit of producing one more unit.

Quantity Discounts

Discounts offered by suppliers to buyers for purchasing large amounts of a product, incentivizing bulk purchases.

Breakpoint

In computing, a breakpoint is a deliberately inserted pause or halt in a program's execution for debugging purposes. In economics, it refers to a level at which there is a change in the rate or conditions of a process or system.

Holding Cost Percentage

Represents the cost incurred to store inventory over a period, expressed as a percentage of the inventory's total value, including expenses such as warehousing, insurance, and depreciation.