Use the Information for the Question(s)below

question 19

Multiple Choice

Use the information for the question(s) below.
Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $250 000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $5 000 (paid at the end of each month) . Your firm can borrow at 5% APR with quarterly compounding.
-An 8.5% APR with monthly compounding is equivalent to an EAR of

• A)8.77%.
• B)8.47%.
• C)8.84%.
• D)8.51%.

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Definitions:

Output

The total amount of goods and services produced by an economy, company, or sector.

AVC

Average Variable Cost is the total variable costs divided by the quantity of output produced, representing the variable cost per unit of output.

AVC

Average Variable Cost, the total variable cost divided by the quantity produced, representing the cost of labor and materials for each unit of output.

ATC

Average Total Cost (ATC) refers to the total cost per unit of output produced, comprising both fixed and variable costs.