Hydroponics Is Considering Adding Another Greenhouse That Would Cost $95,000

question 78

Multiple Choice

Hydroponics is considering adding another greenhouse that would cost $95,000 and generate $20,000 in annual net cash flows over its 8 year expected life.The greenhouse would be depreciated on a straight-line basis to zero and the salvage value is also expected to be zero.If the firm has a marginal tax rate of 40 percent, what is this project's internal rate of return?

• A)between 20 and 24%
• B)between 13 and 14%
• C)between 28 and 32%
• D)between 7 and 8%

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Definitions:

Consumer Equilibrium

A state in which a consumer has allocated their income in a way that maximizes their utility, given their budget constraint.

MU/P Ratio

The Marginal Utility to Price ratio, used in economic analysis to evaluate the satisfaction received from consuming an additional unit of a good relative to its cost.

Marginal Utility

The additional satisfaction or benefit received from consuming one more unit of a good or service.