Calculate the User Cost of Capital of a Machine That

question 22

Multiple Choice

Calculate the user cost of capital of a machine that costs $5000 and depreciates at a rate of 25%,when the nominal interest rate is 10% and the expected inflation rate is 5%.

• A)$150
• B)$500
• C)$1500
• D)$5000

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Definitions:

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time.

Revenue

The total amount of money earned by a business from its operational activities, before any expenses are subtracted.

Equipment Account

An account on a company's balance sheet that reports the value of the equipment that the company owns.

Beginning Balance

The amount of money in an account at the start of a new accounting period.