A Firm Invests in a New Machine That Costs $5,000

question 118

Multiple Choice

A firm invests in a new machine that costs $5,000 a year but which is expected to produce an increase in total revenue of $5,200 a year. The current real rate of interest is 7 percent. The firm should:

• A) Undertake the investment because the expected rate of return of 10 percent is greater than the real rate of interest
• B) Undertake the investment because the expected rate of return of 8 percent is greater than the real rate of interest
• C) Not undertake the investment because the expected rate of return of 6 percent is less than the real rate of interest
• D) Not undertake the investment because the expected rate of return of 4 percent is less than the real rate of interest

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Definitions:

Provincial Jurisdiction

The authority and power exercised by a province or state to govern itself and manage its own affairs.

Bullying

Intimidating or mistreating someone weaker or in a vulnerable position, often involving repeated acts over time.

Diversity Initiatives

Programs and policies designed to promote and support diversity within a workplace or organization in terms of race, gender, sexuality, ethnicity, and other differences.

Human Resources Programs

Initiatives designed by an organization's HR department to recruit, train, manage, and retain employees effectively.