Asked by Claire
A machine cost $ 4,000. It lasts 2 years and has no scrap value (that is, it has no value at the end of those two years of use). In each year, it produces $ 2400 in income. Should the firm invest in the machine if the interest rate is 10%? Should the firm invest in the machine if the interest rate is 20%? Why? What if the machine’s scrap value was $350?