A New Machine,with a 4-Year Life,has an Initial Cost of $1,200

question 13

Multiple Choice

A new machine,with a 4-year life,has an initial cost of $1,200 and annual costs of $380.The equivalent annual cost of this machine is best described as the

• A)4-year annuity payment that has the same net present value as the project's costs given a stated discount rate.
• B)4-year total of all costs divided by four.
• C)annual sales needed to offset these additional costs.
• D)lump sum payment at Time 0 that is equal to these additional costs at a given discount rate.
• E)4-year average after-tax cash flow resulting from the annual costs.

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Definitions:

Average Product

An economic measure of the output per unit of input, such as labor or capital.

Total Product

The overall quantity of output that a firm produces, typically within a specific time period, given a certain amount of inputs.

Total Product

The total quantity of output produced by a firm over a given period of time.

Units of Labor

Quantifiable measurements of labor force input, such as hours worked or number of workers, used in economic analysis to assess productivity or costs.