A Firm Invests in a New Machine That Costs $2,000

question 119

Multiple Choice

A firm invests in a new machine that costs $2,000 a year but which is expected to produce an increase in total revenue of $2,200 a year.The current real rate of interest is 8 percent.The firm should

• A)undertake the investment because the expected rate of return of 12 percent is greater than the real rate of interest.
• B)undertake the investment because the expected rate of return of 10 percent is greater than the real rate of interest.
• C)undertake the investment because the expected rate of return of 9 percent is greater than the real rate of interest.
• D)not undertake the investment, because the expected rate of return of 7 percent is less than the real rate of interest.

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Definitions:

Atomic Mass

The mass of an atom, typically expressed in atomic mass units (amu), representing the total number of protons and neutrons in the nucleus.

Covalent Bonds

A chemical bond formed by the sharing of one or more pairs of electrons between atoms.

Phosphorus

A chemical element with the symbol P and atomic number 15, essential to all living cells and used in the manufacture of fertilizers.

Oxygen

A chemical element with symbol O, essential for cellular respiration in most aerobic organisms.