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1 A firm has 3 possible investments available. The firm can borrow from the bank with an 8% interest rate and save with the bank
1 A firm has 3 possible investments available. The firm can borrow from the bank with an 8% interest rate and save with the bank at a 5% interest rate Project 1: Paying $10,000 today for employee training that will increase profit $9000 next year and $2000 the year after. Project 2: Paying $50,000 for a new truck that will increase profit starting next year $18000 a year for the next 3 years, then disintegrate. Project 3: Paying $20000 for new computers that decrease prot next year by $1000 but increase profit the next year by $22,400 Explain whether each of the following statements is true or false. Be sure to use specific numbers in your explanations a) If the firm has $100,000 on hand, it should do the most expensive project first. (3 points) b) The firm will never borrow money to make any of these investments. (3 points) c) The rate of return on project 2 is less than 5% (2 points) d) (5%, $30,000) is a point on the firm's investment demand curve. (3 points)
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