A firm can invest in one of two projects: the purchase of new manufacturing equipment or the training of its factory workers in the better use of time management. Both projects cost the same amount of money. The purchase of new manufacturing equipment is expected to reduce costs by $10,000 each year for 5 years. The training of the factory workers in the better use of time management is expected to increase revenues by $10,000 each year for 10 years. Which of the following is true?
A. Each of these projects would have the same expected rate of return, as they both cost the same.
B. The training of factory workers would have the higher expected rate of return, as it will increase revenues for a longer time period than the purchase of new manufacturing equipment will reduce costs.
C. The purchase of new manufacturing equipment would have the higher expected rate of return, as it reduces costs whereas the training of factory workers in the better use of time management only increases revenues.
D. The expected rates of return for these two projects cannot be compared, as one project reduces costs and the other increases revenues.
Answer: B
You might also like to view...
Assume that the economy is in a recession and consumers are expecting a fall in their income levels. This will cause a(n):
A) left shift in the market demand for all goods. B) right shift in the market demand for all goods. C) increase in the total quantity demanded of all goods. D) decrease in the total quantity demanded of all goods.
Assume that you purchased a $1,000 perpetual bond that pays a market interest rate of 5 percent. If you attempted to sell this bond today subsequent to an increased market rate of interest of 7.5 percent, then you
a. could only sell this bond at a capital loss. b. could sell this bond at a capital gain. c. would not be able to sell this bond. d. could exchange your bond yielding 5 percent for a bond yielding 7.5 percent on an even exchange basis.
Based on the fact that the companies Ford, IBM, PepsiCo, and McDonald's own and operate producing units in many different countries, they are categorized as:
a. joint ventures. b. sole proprietorship firms. c. partnership firms. d. multinational firms. e. co-operative firms.
When firms price discriminate they turn ________ into ________
A) producer surplus; revenue B) consumer surplus; profit C) total cost; profit D) producer surplus; consumer surplus