Question: Your buddy in mechanical engineering has invented a money machine. The main drawback of themachine is that it is slow. It takes one year to

Your buddy in mechanical engineering has invented a money machine. The main drawback of themachine is that it is slow. It takes one year to manufacture $

100 .

However, once built, the machinewill last forever and will require no maintenance. The machine can be built immediately, but itwill cost $

1000

to build. Your buddy wants to know if he should invest the money to construct it

.

If the interest rate is

9.5 %

per year, what should your buddy do

?

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