A machine currently under consideration by Marcus Industries has a cost of $31, 000. When the purchasing manager complained that a similar machine the company purchased 5 years ago was much cheaper, the salesman responded that the cost of the machine has increased solely in accordance with the inflation rate, which has averaged 5% per year. When the purchasing manager checked the invoice for the machine he purchased 5 years ago, he saw that the price was $25,000. Was the salesman telling the truth about the increase in the cost of the machine? What should the machine cost now, provided the price increased by only the inflation rate? Use the formula

A machine currently under consideration by Marcus Industries has a cost of $31, 000. When the purchasing manager complained that a similar machine the company purchased 5 years ago was much cheaper, the salesman responded that the cost of the machine has increased solely in accordance with the inflation rate, which has averaged 5% per year. When the purchasing manager checked the invoice for the machine he purchased 5 years ago, he saw that the price was $25,000. Was the salesman telling the truth about the increase in the cost of the machine? What should the machine cost now, provided the price increased by only the inflation rate? Use the formula

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter2: The One Lesson Of Business

Section: Chapter Questions

Problem 2.6IP

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