Question

The manager of a T-shirt company is considering investing in a new embroidery machine that costs $8,500, and the depreciation rate is 6.5% per year. The expected increase in next year’s revenue as a result of the investment is $1,500. For what values of the interest rate (r) should the company make this investment? Specify the answer to two places beyond the decimal point. Any r below %.

Answer 1

The interest rate will be "11.147%".

Step-by-step explanation:

The given values are:

Cost of machine,

= $8500

Depreciation rate,

= 6.5%

Increase in income,

= $1500

Now,

⇒
`Increase \ in \ income=Cost \ of \ machine* (R)/(100)+ Cost \ of \ machine* (Depreciation \ rate)/(100)`

On substituting the values, we get

⇒
`1500=8500* (R)/(100)+8500* (6.5)/(100)`

⇒
`1500=85R+552.5`

On subtracting "552.5" from both sides, we get

⇒
`1500-552.5=85R+552.5-552.5`

⇒
`947.5=85R`

⇒
`R=(947.5)/(85)`

⇒
`R=11.147`%