Final answer:
The user cost of capital for the machine that produces 100 units of output per year is approximately 0.1379.
Step-by-step explanation:
The user cost of capital can be calculated using the formula:
User Cost of Capital = (d - i) / (1 - i)
Where d is the depreciation rate, i is the interest rate, and 1 is the interest rate plus the inflation rate.
In this case, d = 25%, i = 13%, and 1 = 3%.
Substituting these values into the formula, we get:
User Cost of Capital = (0.25 - 0.13) / (1 - 0.13) = 0.12 / 0.87 ≈ 0.1379
Therefore, the user cost of capital for the machine that produces 100 units of output per year is approximately 0.1379.