Suppose Your Company Owns a Computer That Cost $10,000 and Depreciates

question 101

Essay

Suppose your company owns a computer that cost $10,000 and depreciates $500 per year. If the interest rate is 5 percent, what is the implicit rental price of the computer? When interest rates increase, are firms more or less likely to purchase equipment?

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Definitions:

Illusory Promise

A statement that appears to be a promise but is too vague or lacks the requisite commitment to be legally enforceable as a contract.

Promissory Estoppel

A legal principle that prevents a promisor from arguing that an underlying promise offered should not be legally upheld if the promisee has relied on that promise to their detriment.

Unilateral Contract

A type of contract in which only one party makes a promise to perform in exchange for an act by the other party.

Promissory Estoppel

A legal principle that prevents a party from retracting a promise when the other party has reasonably relied on that promise to their detriment.