Wintertown Snow Removal Co. purchases snowplows for its residential snow clearing business. The purchase price of an additional snowplow is currently $50 000 and it is expected to produce a stream of MRPs for 12 years. The interest rate is 4 percent and the present value of the stream of MRPs is $50 000.

a. With this information, should the company purchase the additional snowplow?

b. Suppose instead the interest rate were 6 percent. How will this affect the future stream of MRPs and the purchase decision?

c. Suppose instead the interest rate were 2 percent. How will this affect the future stream of MRPs and the purchase decision?

d. Suppose again that the interest rate is 4 percent. The company now learns of a new technology that is expected to reduce the price of home snowblowers by 50 percent. How will this affect the future stream of MRPs and the purchase decision?

e. Suppose the interest rate is 4 percent and that new projections are announced for Wintertown that show a booming economy for the next 5–7 years. How will this affect the future stream of MRPs and the purchase decision?