Marginal revenue product Capital In year 1 In year 2 (Number of electric (dollars per electric (dollars per electric mixers) mixer) mixer) 1 140
Marginal revenue product Capital In year 1 In year 2 (Number of electric (dollars per electric (dollars per electric mixers) mixer) mixer) 1 140 120 2 130 110 3 115 95 Betty's Bakery is considering the purchase of one, two, or three additional electric mixers. An electric mixer has a life of 2 years and has a price of $200. The table above gives the marginal revenue product of a mixer. After 2 years a mixer is worthless. If the interest rate is 15 percent a year, Betty's buys 1 mixer 3 mixers 2 mixers O mixers
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To determine how many mixers Betty should buy we need to calculate the present value PV of the margi...See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started