RainMan Inc A)Airplane Because It Has a Higher NPV
B)Weather Machine Because

question 5

Multiple Choice

RainMan Inc.is in the business of producing rain upon request.They must decide between two investment projects: a new airplane for seeding rain clouds or a new weather control machine built by Dr.Nutzbaum.The discount rate for the new airplane is 9%,while the discount rate for the weather machine is 39% (it happens to have higher market risk) .Which investment should the company select and why? (Assume a 0% inflation rate and that projected costs do not change over time.) $$\begin{array} { l c c } \text { Year } & \text { Airplane } & \text { Weather Machine } \\\hline 0 & - 900 & - 900 \\1 & 500 & 550 \\2 & 600 & 600 \\3 & & 685\end{array}$$

• A)Airplane because it has a higher NPV
• B)Weather machine because it has a higher NPV
• C)Airplane because it has a higher equivalent annual cash flow
• D)Weather machine beca

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Definitions:

ATC

Average Total Cost, the total cost per unit of output when all fixed and variable costs are considered.

Perfectly Competitive Firm

A firm in a perfectly competitive market that cannot influence the market price and thus takes the price as given for its decision making.

Economic Costs

Economic Costs include both the explicit costs (direct payments) and implicit costs (opportunity costs) associated with the resources used in the production of goods or services.

Sports Data

Information and statistics collected from sporting events, which can include player performance, game outcomes, and other relevant metrics for analysis and decision-making.