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hello can you resolve the question # 4 ( but I have attached question # 2 as a reference only ). the question from question
hello can you resolve the question # 4 ( but I have attached question # 2 as a reference only ). the question from question # 4 : What would you expect to be the price that would prevail in this market? Who will produce how much for the market? Explain intuitively.
Suppose your firm has limited capital to invest in new R&D. Two lines of innovation (referred to as projects) have been proposed by managers. Project 1 costs $100,000 up front, but generates $50,000 in additional profits at the end of each of the next 4 years. Project 2 costs $150,000 in upfront costs, generating and additional 575,000 in profits at the end of each of the next three years. Assume the discount rate is 8%. a) Whatis the net present value of Project 1? b) If your firm can only pursue one of the projects, which should it pursue and why? Explain. c) Suppose that Project 2 results in a patentable innovation, potentially extending the flow of $75,000 in profits. With patent protection the firm would earn $75,000 at the end of each of the next 20 years. What is the net present value of Project 2 with patent protection? 4, Answer the following, assuming the firms in Question 2 above compete as Bertrand duopolists. a) What would you expect to be the price that would prevail in this market? Who will produce how much for the market? Explain intuitivelyStep by Step Solution
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