2. The cash flows for an investment project are listed below. the firm will invest if the present value of the cash flows is positive.

Year 1 200

Year 2 100

Year 3 120

Should the firm undertake this project: a. If the interest rate is 5 percent? b. If the interest rate is 10 percent?

5. Given the following information, calculate tobin's q statistic: Let's suppose that a company has one million outstanding shares of stock, each valued at $25. Let us suppose also that the replacement cost of its physical capital stock is $18 million. a. Should this firm invest (net) in more physical capital?