Panda Express is a takeaway Chinese restaurant. They are considering investing in a machine that automates the cooking of bowls of rice. The machine costs $1,000 and has a physical depreciation rate of 1% per annum. It is expected that at the end of the year Panda Express could sell the machine for $500. The annual real interest rate is 1% per annum and the annual inflation is 4%. The expected inflation is also 4%. If Panda Express buys the machine it can produce an extra 1,000 bowls of rice a year.
Each bowl of rice is sold for $0.52. Should Panda Express invest in the new machine?

Question

Panda Express is a takeaway Chinese restaurant. They are considering investing in a machine that automates the cooking of bowls of rice.  The machine costs $1,000 and has a physical depreciation rate of 1% per annum.  It is expected that at the end of the year Panda Express could sell the machine for $500.  The annual real interest rate is 1% per annum and the annual inflation is 4%. The expected inflation is also 4%. If Panda Express buys the machine it can produce an extra 1,000 bowls of rice a year.  
 Each bowl of rice is sold for $0.52. Should Panda Express invest in the new machine?

Answer

Yes because the benefit from investing is greater than the cost of investing

Answer

There is insufficient information to answer this question.

Answer

Yes because the benefit from investing is equal to the cost of investing

Answer

None of the other answers are correct

Answer

No because the benefit from investing is less than the cost of investing

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Panda Express is a takeaway Chinese restaurant. They are considering investing i...

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