Rambus Inc

question 55

Essay

Rambus Inc.would like to purchase a production machine for $325,000.The machine is expected to have a life of three years,and a salvage value of $50,000.Annual maintenance costs will total $12,500.Annual savings are predicted to be $112,500.The company's required rate of return is 12 percent.
Ignoring the time value of money,calculate the net cash inflow or outflow resulting from this investment opportunity.

---

Definitions:

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved or is not achievable.

Actual Production

The total quantity of goods and services produced by an economy or firm at any given time, reflecting real output.

Diagram

A simplified drawing showing the appearance, structure, or workings of something; a schematic representation.

Allocative Efficiency

A state of the economy in which production represents consumer preferences; every good or service is produced up to the point where the last unit provides a benefit to consumers equal to the cost of producing it.