Suppose a handbill publisher can buy a new duplicating machine for $500 and the duplicator has a 1-year life. The machine is expected to contribute $550 to the year's net revenue. What is expected rate of return? If the real interest rate at which funds can be borrowed to purchase the machine is 8 percent, will the publisher choose to invest in the machine? Explain.© BrainMass Inc. brainmass.com October 10, 2019, 12:22 am ad1c9bdddf
Expected Rate of return = (550-500)/500 = 0.10 or 10%
Rate of interest for borrowing funds = ...
The expected rate of return is highlighted.