The local bus company considers purchasing ten more buses. Each bus costs $50,000 and will last seven years. The firm estimates that the purchase will increase it's annual revenues by $100,000 per year for as long as the buses last. If the real interest rate is 10%, should the local bus company buy the buses? Would your answer change if the interest rate fell to 8%?

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The Answer of The local bus company considers purchasing ten more buses. Each bus costs $50,000 and will last seven years. The firm estimates that the purchase will increase it's annual revenues by $100,000 per year for as long as the buses last. If the real interest rate is 10%, should the local bus company buy the buses? Would your answer change if the interest rate fell to 8%?

The Local Bus Company Considers Purchasing Ten More Buses