Suppose a Firm Producing Aircraft Engines Is Considering the Purchase

question 27

Multiple Choice

Suppose a firm producing aircraft engines is considering the purchase of a robotic assembly machine at a price of $4 million.The firm expects the discounted MRP of the machine to be $1 million over each of the first 3 years,and $0.5 million each in years 4 and 5,after which the machine has no value.This firm should

• A)not buy the machine because its present value is less than its purchase price.
• B)buy the machine because its present value is more than its purchase price.
• C)be indifferent about the purchase because its present value is equal to its purchase price.
• D)not buy the machine because its marginal cost is greater than its marginal revenue.
• E)buy the machine because its marginal cost is less than its marginal revenue.

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