The capital input market, The Capital Input Market

The capital input market

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The Capital Input Market

a) Suppose that the price of a new car is $15,000. If the interest rate is 5%/yr, maintenance costs are 6%/yr, and depreciation is 20%/yr, what will be the annual rental rate for the car?

b) Suppose that a new robot is expected to generate $5250 additional revenue at the end of each year for 3 years. If annual maintenance costs are $500, the annual interest rate is 8%, and the robot can be salvaged in 3 years for $1000, what is the present value of this robot?

c) If the annual payment on a consol bond is $750, what is the price of this bond if the interest rate is (and is expected to remain at): (a) 8%/year; (b) 6%/year?

Reference no: EM131095429

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The capital input market : The Capital Input Market

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