“The higher the minimum desired rate of return.....?

Question

“The higher the minimum desired rate of return, the higher the price that a company will be willing to pay for cost saving equipment”. Do you agree or disagree and why!

Answer 1

Yes. It makes sense

Answer 2

True.  When a company must provide higher levels of return, saving costs via more efficiente production processes is usually desirable.  Many times these machines are not cheap.  In fact, because they are not cheap, it is hard for competitors to imitate.  You may end up with a significant, semi-permanent advantage.  Just pray that the consumer tastes don't change too quickly.

Another way to get to high levels of returns is to differentiate the product.  You may not save in the production process, but your systems add that additional feature or "style" that commands much higher selling prices.