You Can Continue to Use Your Less Efficient Machine at a Cost

question 69

Multiple Choice

You can continue to use your less efficient machine at a cost of $8,000 annually for the next five years.Alternatively, you can purchase a more efficient machine for $12,000 plus $5,000 annual maintenance.At a cost of capital of 15 percent, you should:

• A)Buy the new machine and save $600 in equivalent annual costs
• B)Buy the new machine and save $388 in equivalent annual costs
• C)Keep the old machine and save $388 in equivalent annual costs
• D)Keep the old machine and save $580 in equivalent annual costs $12,000 + $5,000

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Definitions:

Downward Trend

Describes a situation where there is a consistent decline in the value or level of a financial instrument, market index, or economic performance over time.

Discouraged Workers

Individuals not looking for work because they believe no jobs are available for them.

Officially Unemployed

Officially unemployed refers to individuals who are without a job, actively seeking work, and currently available to take up employment.

Fully Employed Economy

A situation where all available labor resources are being used in the most economically efficient way, with minimal unemployment.