A Bank Can Purchase an ATM (Automated Teller Machine)for $110,000

question 31

Essay

A bank can purchase an ATM (automated teller machine)for $110,000 that has an estimated life of 6 years.Maintenance over that period will begin at $2,500 annually and increase at a 10% rate.If the ATM is purchased,the bank will not be required to hire one additional (human)teller.Including fringe benefits,the teller costs $18,000 per year,and this amount is expected to increase 5% annually.If the bank's cost of capital is 10%,which alternative should be selected?

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Definitions:

Private Sector

Refers to the part of the economy that is owned, operated, and funded by private individuals or companies, as opposed to the government.

Majority Voting

A decision-making process where the option that receives the most votes from participants wins, often used in elections and organizational decisions.

Negative Externalities

Costs incurred by third parties not directly involved in an economic activity, for example, pollution affecting non-participating individuals.

Economically Inefficient Outcomes

Situations where resources are not allocated optimally, resulting in lost potential utility or value.