TRINITY Ltd

question 32

Multiple Choice

TRINITY Ltd. produces different pieces of furniture. A set of electric drills used in the production of furniture wears out rapidly, after which the firm scraps them. Calculate the equivalent annual cost (capital costs) of a set of electric drills if the firm buys the set for $4 500 and uses it for 5 years. Assume an annual interest rate of 8%.

• A)$900
• B)$1 082
• C)$1 127
• D)$1 206
• E)$1 284

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Definitions:

Prices Fall

A situation where the amount of money required to purchase goods or services decreases, typically due to reduced demand or increased supply.

Quantity Theory

An economic theory that relates the level of money supply in an economy to the level of prices and the volume of production.

Hyperinflations

Extremely high and typically accelerating inflation rates, eroding the real value of the local currency and leading to a loss of confidence in the currency.

Moderate Inflation

A situation where the general price level of goods and services rises at a modest pace.