Tracy Purchased a 15-Year Franchise for a Computer Outlet Store

question 122

Multiple Choice

Tracy purchased a 15-year franchise for a computer outlet store that is expected to generate income at the rate of dollars/year. If the prevailing interest rate is 10% / year compounded continuously, find the present value of the franchise. (Hint: Use the formula of the present value .) Please round the answer to the nearest cent.

• A) $620,883.01
• B) $709,580.59
• C) $745,059.62
• D) $931,324.52
• E) $558,794.71

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Definitions:

Diminishing Marginal Product

The principle that as additional units of a variable input are added to fixed inputs, the increase in output will eventually decrease.

Production Function

An equation expressing the relationship between inputs used in production and the output generated from those inputs.

Marginal Product

The increase in output that results from using one more unit of a particular input, assuming all other inputs remain constant.

Marginal Product

The additional output derived from adding one more unit of a specific input, while holding all other inputs constant.