You Have Just Purchased a New VCR to Show Videos

question 45

Multiple Choice

You have just purchased a new VCR to show videos to your customers.The VCR cost $500,and you depreciate the machine at a rate of 25% each year.You can borrow money from the bank at 10%,or receive 6% for depositing money at the bank.The expected inflation rate in the coming year is 5%.You used the company's own funds to purchase the VCR.The firm's user cost of capital for the first year is

• A)$130.
• B)$150.
• C)$155.
• D)$175.

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Definitions:

Assignment

The transfer of rights, duties, or interests under a contract or agreement from one party to another.

Money Damages

A sum of money awarded in compensation for loss or injury in a civil lawsuit.

Breach of Contract

The failure to perform any term of a contract, agreement, or settlement without a legitimate legal excuse.

Privity of Contract

The relationship between parties in a contract that allows them to sue each other but prevents any third party from doing so.