Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

تمرين 20

Equation assumes that machines do not depreciate. How should the equation be changed if the machine deteriorates at the rate of d per year? If the machine still lasts forever (even though it will be very deteriorated), will its rental rate be given by the formula in Chapter 14-that is, v = (r + d)P?
Equation (1 + r) (1 + p e ) = 1+ r + p e + r p e = 1 + i