Question

Suppose that new machines cost $504, and the marginal benefit from new machines is MB = 246 – 6K, where K is the number of machines purchased. The depreciation rate is 15% and the dividend yield is 10%.
a. What amount of capital will you purchase? Why?
b. What amount of capital would you purchase if there were a 25% tax rate on cash earnings minus labor costs?


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  • CreatedApril 25, 2015
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