What is the internal rate of return on a new $2,000 heater that would reduce your heating costs by $200 a year forever? Under what conditions would you make the purchase?
What will be an ideal response?
The internal rate of return is 200/2,000 = 10%. The purchase should be made as long as the interest rate is less than 10%.
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If the government sells U.S. Treasury bonds to finance its budget deficit, one would expect:
a. interest rates to rise. b. domestic investment to rise. c. tax rates to fall. d. inflation to rise. e. interest rates to fall.
A measure of sensitivity or responsiveness to changes in price or income is called
a. elasticity b. technology c. supply and demand d. social pressure e. kickback
What economic concept is represented using the equation E(MB) > E(MC)?
a. comparative advantage b. net marginal benefit c. cost of marginal thinking d. rule of rational choice
Which one of the following statements about the Gini coefficient is not true?
A. It reflects the data shown in the Lorenz curve. B. It must fall when the amount of income in an economy increases. C. It equals zero when there is perfect equality. D. It equals one when there is perfect inequality. E. It increases as income inequality increases.