Compare the present value with the equipment cost- Business Economics
1. You have borrowed $50,000 at an interest rate of 12%. Equal payments will be made over a three-year period. The first payment will be made at and of the first year. What will be the annual payment be?
2. You are considering buying a piece of industrial equipment to automate a part of your production process. This automation will save labor costs by as much as $35,000 per year over 10 years. The equipment will cost $200,000. Should you purchase the equipment if your interest rate is 12%? (Hint: compare the present value with the equipment cost to see a cheaper way)
