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The Partners in the Wonderwords Word Processing Firm Spend $12,000

Question 111

Multiple Choice

The partners in the Wonderwords word processing firm spend $12,000 on computers,hoping to earn an additional $1,000 per year with them.If the partners could earn 7 percent interest on a bank deposit they should


A) put the $12,000 in the bank
B) put $6,000 in the bank and spend only $6,000 on computers
C) buy the computers because the rate of return on the computers is positive
D) buy the computers only if they do not have to borrow the funds to buy the computers
E) buy the computers because the rate of return on the computers exceeds 7 percent

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