Telecom Namibia is considering the purchase of a machine which cost 100 thousand dollars, and which has a lifespan of only two years, after which it has a zero scrap value. This investment, if undertaken, will generate gross return of 53 thousand dollars and 84 thousand dollars at the end of the first year and second year, respectively, after deducting all the cost except depreciation and interest rate cost. Should Telecom Namibia go ahead with this investment when the prevailing rate of interest is 18 percent? Explain

Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter21: Costs And The Supply Of Goods
Section: Chapter Questions
Problem 17CQ
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(a)    Telecom Namibia is considering the purchase of a machine which cost 100 thousand dollars, and which has a lifespan of only two years, after which it has a zero scrap value. This investment, if undertaken, will generate gross return of 53 thousand dollars and 84 thousand dollars at the end of the first year and second year, respectively, after deducting all the cost except depreciation and interest rate cost. Should Telecom Namibia go ahead with this investment when the prevailing rate of interest is 18 percent? Explain                                                                                                                                                                                             
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