1. You go out to the best restaurant in town and order a lobster dinner for $40. After eating half ofthe lobster, you realize that you are quite full. Your date wants you to finish your dinner becauseyou can't take it home and because "you've already paid for it." What should you do?

2. A company has an investment project that would cost $10 million today and yield a payoff of $15 million in 4 years.

a. Should the firm undertake the project if the interest rate is 11 percent? 10 percent? 9 percent? 8 percent?

b. Can you figure out the exact cutoff for the interest rate between profitability and nonprofitability?