Suppose a Machine Generates $500 Worth of Revenue at the End

question 30

Multiple Choice

Suppose a machine generates $500 worth of revenue at the end of each of the next three years, at which time it can be sold to a salvage company for $350. If the annual rate of interest is 0.08, what is the maximum amount a business would pay for this machine if maintenance costs are $100 per year?

• A)$1506
• B)$1309
• C)$9567
• D)$1096

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Definitions:

Buyer Pays

A pricing term indicating that the purchaser is responsible for the cost of goods, shipping, and any additional expenses associated with the purchase.

Tax Incidence

Describes how the burden of a tax is distributed between buyers and sellers, depending on the relative elasticities of supply and demand.

Levied On

Imposed or applied, typically in the context of taxes or duties on goods, services, or income.

Seller Bears

Refers to situations where the seller is responsible for costs or burdens, such as during the transaction of goods where the seller pays for shipping or returns.