The Cost of Using an Existing Asset: Small Appliances, Inc

question 26

Multiple Choice

The cost of using an existing asset: Small Appliances, Inc., is considering starting a new line of business with the excess capacity it currently has on its rivet machine. The current machine is expected to last four years at the current rate of production. However, if a new line of business is taken on, then the machine will have to be replaced in three years instead of four. A new machine that will last four years would cost $50,000. What is the cost of taking on the new line of business? Round to the nearest dollar and assume a 9 percent cost of capital.

• A) $11,917
• B) $12,500
• C) $15,433
• D) $50,000

Understand the principles of career counseling and the importance of person-environment fit.

Appreciate the role of intrinsic and extrinsic motivation in enhancing work performance.

Identify strategies for finding work that aligns with personal interests and strengths.

Recognize the impact of preconceptions and biases in the hiring process and employee evaluations.

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Definitions:

Public Good

A product or service that is non-excludable and non-rivalrous, meaning it can be used by many people simultaneously without reducing its availability to others.

Tiebout Hypothesis

A theory suggesting that people will migrate to local jurisdictions that best satisfy their preferences for public goods and services, reflecting a form of market efficiency in local government.

Public Good

A good that is non-excludable and non-rivalrous, meaning it can be used by many people simultaneously without depletion.

Free-rider Problem

A situation in which some individuals consume more than their fair share of a public resource, or shoulder less of the cost of its production, benefiting from goods or services without paying for them.