Introduction to Economics 1 Deneme Sınavı Sorusu #1173782
Assume for a factory owner the purchasing price of the machine is 8000. The factory owner expects to use
the oven for a year and then sell it for 4000. At this point, they has to make a decision as to whether
to buy this oven or to purchase a bond which bears 5% annual interest rate. The new machine will bring an additional revenue of 10000 per year. What is the net present value (NPV) of the machine?
|
8000 |
|
- 7000 |
|
4000 |
|
7000 |
|
8000 |
The net present value of an asset expected to last for t years can be calculated by the following formula:
Here, Pp stands for the purchasing price of an asset, NR is the difference between the revenue received from an asset and the operating costs per period, Ps is the selling price of an asset and i is the annual interest rate.
Therefore the machine's net present value will be calculated as NPV=-8000+[(10000-4000)/(1+5)] = - 7000
The answer is B.
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