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A firm relies on R&D to maintain profitability. The firm needs to determine the maximum amount to invest today (or invest in Phase I) for

A firm relies on R&D to maintain profitability. The firm needs to determine the maximum amount to invest today (or invest in Phase I) for its three-phased project.

Phase I: Research. (Invest R₀ today.)

Phase II: Development. (Invest I₁ one year from now.)

Phase III: Implementation. (Invest I₂ in facilities, manpower, etc., three years from today.)

Using a MARR of 12%, sigma=50%, and r=6%, determine the best investment strategy for the firm.

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Make Implementation Investment Decision Make Development Decision Start Research

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