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(13) Which of the following machines has the lowest user cost? Machine A costs $10,000 in real dollars and depreciates at a 20% rate, machine B costs $25,000 in real dollars and depreciates at a 10% rate, machine C costs $15,000 in real dollars and depreciates at a 15% rate, and machine D costs $20,000 in real dollars and depreciates at a 5% rate. The nominal interest rate is 4% and the expected inflation rate is 2%. (A) Machine A (B) Machine B (C) Machine C (D) Machine D

(13) Which of the following machines has the lowest user cost? Machine A costs $10,000 in real dollars and depreciates at a 20% rate, machine B costs $25,000 in real dollars and depreciates at a 10% rate, machine C costs $15,000 in real dollars and depreciates at a 15% rate, and machine D costs $20,000 in real dollars and depreciates at a 5% rate. The nominal interest rate is 4% and the expected inflation rate is 2%. (A) Machine A (B) Machine B (C) Machine C (D) Machine D

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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(13) Which of the following machines has the lowest user cost? Machine A costs $10,000 in real dollars and depreciates at a 20% rate, machine B costs $25,000 in real dollars and depreciates at a 10% rate, machine C costs $15,000 in real dollars and depreciates at a 15% rate, and machine D costs $20,000 in real dollars and depreciates at a 5% rate. The nominal interest rate is 4% and the expected inflation rate is 2%. (A) Machine A (B) Machine B (C) Machine C (D) Machine D (14) You have just purchased a new machine which costs $1000 in real dollars, and you depreciate the machine at a rate of 15% each year. You can borrow money from the bank at a nominal rate of 8%, or receive a nominal rate of 2% for depositing money at the bank. The expected inflation rate in the coming year is 2%. You used your own funds to purchase the machine. The user cost of capital for the first year is (A) $150 (B) $170 (C) $210 (D) $230
Transcribed Image Text:(13) Which of the following machines has the lowest user cost? Machine A costs $10,000 in real dollars and depreciates at a 20% rate, machine B costs $25,000 in real dollars and depreciates at a 10% rate, machine C costs $15,000 in real dollars and depreciates at a 15% rate, and machine D costs $20,000 in real dollars and depreciates at a 5% rate. The nominal interest rate is 4% and the expected inflation rate is 2%. (A) Machine A (B) Machine B (C) Machine C (D) Machine D (14) You have just purchased a new machine which costs $1000 in real dollars, and you depreciate the machine at a rate of 15% each year. You can borrow money from the bank at a nominal rate of 8%, or receive a nominal rate of 2% for depositing money at the bank. The expected inflation rate in the coming year is 2%. You used your own funds to purchase the machine. The user cost of capital for the first year is (A) $150 (B) $170 (C) $210 (D) $230
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