A grocery store manager has $600 in cash with which to buy a rug cleaner.Rental income from the cleaner would be about $75 per year.The interest rate is 11 percent.Should the manager buy the machine?
A)Yes,since the rate of return is greater than the rate of interest.
B)Yes,since the manager does not have to borrow the money the interest rate is irrelevant.
C)No,since the yield of $75 is less than the interest cost of 11 percent.
D)No,since the rate of return is less than the interest rate.
E)Yes,since the return of $75 is greater than 11 percent.

Question

Quizplus · Accepted Answer

The rate of return from the rental income of $75 per year is higher than the interest rate of 11 percent. Therefore, the investment in the rug cleaner would be profitable and the manager should buy the machine.

A Grocery Store Manager Has $600 in Cash with Which