Suppose a manager of a firm is considering investing in a piece of equipment that will generate $20,000 in future operating profit each year for the next three years. The discount rate is 5 percent and the salvage value of zero. The equipment's current cost is $50,000 and this cost will be financed by the firm. If the tax rate on the firm's profit is 4 percent each year, what is the net present
value of the equipment?
A) $4,464
B) $2,286
C) $3,569
D) -$2,581
B) $2,286
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Differences in growth rates cannot explain why
A. some countries are wealthier than others. B. income inequality exists. C. the convergence hypothesis may hold. D. the productivity growth rates in China and Japan are converging.
A firm's opportunity cost of using resources provided by the firm's owners is called
a. sunk costs b. fixed costs c. explicit costs d. implicit costs e. entrepreneurial costs
Which of the following is one possible explanation for the change in the natural rate of unemployment in the United States during the 1970s?
A) contractionary fiscal policy B) an increase in the proportion of labor contracts that were indexed C) contractionary monetary policy D) all of the above E) none of the above
What are the three limitations on human rationality that behavioral economics emphasizes?
What will be an ideal response?