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A company plans to purchase a machine at a cost of $200,000. The machine will produce 1,000 units of a product each year. In addition,
- A company plans to purchase a machine at a cost of $200,000. The machine will produce 1,000 units of a product each year. In addition, the machine will operate for 10 years, after which, it will be salvaged for $S. The profits derived from each unit produced is $P. Assume an interest rate of 5% and ignore tax.
- Determine the present value of purchasing this machine in terms of P and S.
- Is the present value of purchasing this machine more sensitive to P or S? Explain.
- Suppose $S = $10,000. Determine the breakeven unit profit P.
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Econometric Analysis Of Cross Section And Panel Data
Authors: Jeffrey M Wooldridge, J M Wooldridge
2nd Edition
0262232588, 9780262232586
