Question

Instructions: Students should answer the following questions: 1. You want to purchase one of the following milling machines. Machine A Machine B InitialCost $20,000 $30,000 Life 10 years 10 years Salvage Value $2,000 $5,000 Annualreceipts $9,000 $12,000 Annualdisbursements $3,500 $4,500 What are the approximate rates of return for machines A and B, respectively? a) 22.5% and 28.2% b) 23.9% and 27.0% c) 24.8% and 22.1% d) 25.0% and 26.8%

          Instructions: Students should answer the following questions:
1. You want to purchase one of the following milling machines.
Machine A Machine B
InitialCost
$20,000
$30,000
Life
10 years
10 years
Salvage Value
$2,000
$5,000
Annualreceipts
$9,000
$12,000
Annualdisbursements $3,500
$4,500
What are the approximate rates of return for machines A and B, respectively?
a) 22.5% and 28.2%
b) 23.9% and 27.0%
c) 24.8% and 22.1%
d) 25.0% and 26.8%

Instructions: Students should answer the following questions:
1. You want to purchase one of the following milling machines.
Machine A Machine B
InitialCost
20,00030,000
Life
10 years
10 years
Salvage Value
2,0005,000
Annualreceipts
9,00012,000
Annualdisbursements 3,5004,500
What are the approximate rates of return for machines A and B, respectively?
a) 22.5% and 28.2%
b) 23.9% and 27.0%
c) 24.8% and 22.1%
d) 25.0% and 26.8%

Added by Michael M.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Dharmendra Maheshwari

Step 1

The annual depreciation is calculated by subtracting the salvage value from the initial cost and dividing it by the life of the machine. For Machine A: Annual depreciation = (Initial cost - Salvage value) / Life Annual depreciation = ($30,000 - $4,500) / Show more…

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d25.0% and 26.8% c) 24.8% and 22.1% b) 23.9% and 27.0% a) 22.5% and 28.2% Annual receipts Salvage Value Life Annual disbursements Initial Cost Instructions: Students should answer the following questions: $3,500 $9,000 $2,000 10 years $20,000 Machine A $4,500 $12,000 $5,000 10 years $30,000 Machine B