A Firm Is Considering the Purchase of a Capital Good

Multiple Choice

A firm is considering the purchase of a capital good that will generate an additional $40,000 income each year for 4 years (after which time the capital good is useless and has no scrap value) . The interest rate is 4 percent. It follows that the firm should not purchase the capital good if its price is greater than (approximately)

A) $135,800.
B) $111,004.
C) $160,200.
D) $174,915.
E) $123,318.