Assume the following: (1) the real cost of a unit of capital is one; (2) the unit of capital is expected to increase a firm's real profit by $10,000 each year, and depreciate by 8% each year ( = .08); and (3) The real interest rate is 2% (r = .02). What is the "user cost" or "rental cost" of this unit of capital? 

A) .02

B) .06 

C) .10 

D) .08/.02 = 4 

E) none of these

Answer rating: 100% (QA)

The detailed answer for the above question is provided below The correct answer is C 010 Explanation ... View the full answer