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EtaGo has two available projects,AandB.Acosts 100 att 0 and will generate a cash flow 242 att 1 .Bcosts 340 att 0 and will also generate

  1. EtaGo has two available projects,AandB.Acosts 100 att0and will generate a cash flow 242 att1.Bcosts 340 att0and will also generate the cash flow 242 att1. If EtaGo invests in bothAandB, the total cash flow will be 605 att1. The rate of return is 10%.
  2. (a) What is EtaGo's optimal investment att0?

(b) Suppose that another company wants to sell one projectAto EtaGo at the price 30. (Obviously, if EtaGo buys the projectAfrom that company, it does not invest in it again by paying the cost 100.) Will EtaGo buy the projectA? Will it invest in projectBin this case?

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