You have just purchased a new VCR to show videos to your customers.The VCR cost $500,and you depreciate the machine at a rate of 25% each year.You can borrow money from the bank at 10%,or receive 6% for depositing money at the bank.The expected inflation rate in the coming year is 5%.You used the company's own funds to purchase the VCR.The firm's user cost of capital for the first year is
A)$130.
B)$150.
C)$155.
D)$175.

Question

Quizplus · Accepted Answer

The Answer of You have just purchased a new VCR to show videos to your customers.The VCR cost $500,and you depreciate the machine at a rate of 25% each year.You can borrow money from the bank at 10%,or receive 6% for depositing money at the bank.The expected inflation rate in the coming year is 5%.You used the company's own funds to purchase the VCR.The firm's user cost of capital for the first year is
A)$130.
B)$150.
C)$155.
D)$175.

You Have Just Purchased a New VCR to Show Videos