What amount of capital will you purchase why -nbsp what


Suppose that new machines cost $504, and the marginal benefit from new machines is MB = 246 - 6K, where K is the number of machines purchased. The depreciation rate is 15%, and the dividend yield is 10%.

a. What amount of capital will you purchase? Why?

b. What amount of capital would you purchase if there were a 25% tax rate on cash earnings minus labor costs?

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Financial Econometrics: What amount of capital will you purchase why -nbsp what
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