7.10 Consider the following financial data for a project:

(a) What is i* for this project?

b) If the annual expense increases at a 7% rate over the previous years expenses, but the annual income is unchanged, what is the new i*?

(c) In part (b),at what annual rate will the annual income have to increase to maintain the same obtained in part (a)?

Initial investment Project life Salvage value Annual revenue Annual expenses (including income taxes) $50,000 8 years $10,000 $25,000 $ 9,000