Assume, $5000 investment yields an annual benefit of $300 in present prices beginning next year

and continuing for forever. The market interest rate is 8% and there is 25% tax on investment

returns.

a. Find the internal rate of returns.

b. Assume, the 25% of money funding the project comes at the expense of consumption,

and 75% at the expense of investment. Is the project admissible using the weighted

average rate of returns? Show your work.

c. How is the decision affected if there is an unanticipated inflation?