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 The rule to follow in determining the optimal investmen ...

Suppose that new machines cost $504, and the marginal benefit from new machines is MB = 246

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 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?
Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...