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(6,000) (8,000) (5,000) (6,000 ) (5,000 ) Year 1 2 3 4 5 Price of Machine = 30,000, r>O, ITC = 0 Please answer the
(6,000) (8,000) (5,000) (6,000 ) (5,000 ) Year 1 2 3 4 5 Price of Machine = 30,000, r>O, ITC = 0 Please answer the next 5 questions based upon the information provided above for a company's potential investment in a piece of machinery. 1. Which of the following statements is correct? A. The present value of the Expected Net Revenue stream covers the AC of the machine and hence the investment is feasible. B. The present value of the Expected Net Revenue stream exceeds the AC of the machine and hence the investment is feasible. C. The expected rate of profit on this investment exceeds the interest rate and hence this investment is feasible. D. This investment does not satisfy the feasibility test and hence should not be undertaken. E. None of the above are correct. 2. Suppose the price of the machine falls to $20,000. Now which of the following statements is correct? A. The present value of the Expected Net Revenue stream equals the AC of the machine and hence the investment is feasible. B. The present value of the Expected Net Revenue stream exceeds the AC of the machine and hence the investment is feasible. C. The expected rate of profit on this investment exceeds the interest rate and hence this investment is feasible. D. None of the above are correct 3. Beginning with the original scenario, if the interest rate decreases to zero and the ENR for year three increases by $1,000, the expected rate of profit on this investment is %. 4. Beginning with the original scenario, if the interest rate falls to zero and a 20% ITC becomes available on this investment, then the expected rate of profit on this investment is %. 5. Other things equal, the stock of capital inherited by future generations is likely to be smaller when government spending: A. increases during a period of recession, rather than prosperity. B. is primarily for capital-type goods. C. is financed by borrowing. D. is financed by taxation. (6,000) (8,000) (5,000) (6,000 ) (5,000 ) Year 1 2 3 4 5 Price of Machine = 30,000, r>O, ITC = 0 Please answer the next 5 questions based upon the information provided above for a company's potential investment in a piece of machinery. 1. Which of the following statements is correct? A. The present value of the Expected Net Revenue stream covers the AC of the machine and hence the investment is feasible. B. The present value of the Expected Net Revenue stream exceeds the AC of the machine and hence the investment is feasible. C. The expected rate of profit on this investment exceeds the interest rate and hence this investment is feasible. D. This investment does not satisfy the feasibility test and hence should not be undertaken. E. None of the above are correct. 2. Suppose the price of the machine falls to $20,000. Now which of the following statements is correct? A. The present value of the Expected Net Revenue stream equals the AC of the machine and hence the investment is feasible. B. The present value of the Expected Net Revenue stream exceeds the AC of the machine and hence the investment is feasible. C. The expected rate of profit on this investment exceeds the interest rate and hence this investment is feasible. D. None of the above are correct 3. Beginning with the original scenario, if the interest rate decreases to zero and the ENR for year three increases by $1,000, the expected rate of profit on this investment is %. 4. Beginning with the original scenario, if the interest rate falls to zero and a 20% ITC becomes available on this investment, then the expected rate of profit on this investment is %. 5. Other things equal, the stock of capital inherited by future generations is likely to be smaller when government spending: A. increases during a period of recession, rather than prosperity. B. is primarily for capital-type goods. C. is financed by borrowing. D. is financed by taxation
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