Assume that the law of one price holds. A shirt that retails for $120 in New York sells for £60 in London. The exchange rate between the British pound and the dollar is £1 = $1.50. Assuming away transportation costs and trade barriers, this creates a profit-making opportunity called .

You are considering the purchase of one of two machines used in your manufacturing plant. machine 1 has a life of two years, costs $20,000 initially, and then $4,000 per year in maintenance costs. machine 2 costs $25,000 initially, has a life of three years, and requires $3,500 in annual maintenance costs. either machine must be replaced at the end of its life with an equivalent machine. using eac which is the better machine for the firm