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2.. A firm has the option to invest in only two possible projects: Project A costs $25,000 today,and increases revenue by $15,000 next year and
2.. A firm has the option to invest in only two possible projects: Project A costs $25,000 today,and increases revenue by $15,000 next year and $12190 in two years. Project B costs $9,000 today and pays $10,080 next year. a) Determine whether or not each of these projects is a good investment if the rate of interest is 10%. Show the work that generated your conclusions. (3 points) b) Calculate the rate of return for project B and explain why it is more difficult to calculate the rate of return for project A (3 points) Suppose you were told that the rate of return for project A was 6% c) Explain why this is consistent with the work in part (a). (2 points) d) Use all the information in this problem to draw the investment demand curve for this firm for all interest rates between 0%-15%. Be sure to clearly label both axes. (3 points)
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