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3. A firm has earnings of $10,000 a year in perpetuity. It has the opportunity to invest 25% of its earnings each year in a
3. A firm has earnings of $10,000 a year in perpetuity. It has the opportunity to invest 25% of its earnings each year in a project that earns 14% the next year. The two-period investment project (spend $2500, earn (1.14)*($2500)) continues each year into perpetuity. The appropriate discount rate is 15%. Without the project, the firm is worth __________. With the project, the firm is worth __________
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