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

EtaGo has two available projects,AandB.Project Acosts 100 att₀and will generate a cash flow 242 att₁.Project Bcosts 340 att₀and will also generate the cash flow 242 att₁. If EtaGo invests in bothAandB, the total cash flow will be 605 att_1. The rate of return is 10%.

(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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