Intermedians Inc. develops, manufacutres, and sells industrial adhesives. Currently, almost all their sales are to GM$\text{'}$s$,$ Ford's, and Toyota's U$.$S$.$

automotive manufacturing facilties.

They are considering two R&D projects: Project Fargo, and Project Salem.

Project Fargo

Develop a new line of automotive adhesives with fewer VOCs $($less air pollution$).$ This would be a product line extention for Intermedians'

existing products sold to their current customers.

R&D is expected to take two years. Product launch, assuming R&D is succesful, would occur in Year $3.$

$($$s in $000$s$)$

Year

Expected Cash Flow

In the $2$ previous years, Intermedians spent

$$2,055$ on Project Fargo.

Project Salem

Develop a new line of adhesives for frozen food packaging to reduce waste due to package failure. To develop this line, Intermedians

would have to license technology from Rutgers.

Intermedians would pay Rutgers

$$750$ in Year $0$ to license a technology to produce the new line of adhesives.

R&D is expected to take four years. Product launch, assuming R&D is successful, would occur in year $5.$

$($$s in $000$s$)$

Year

Expected Cash Flow

In the $3$ previous years, Intermedians spent

$$3,405$ on Project Salem.

Part A

$($i$)$ What might have lead her to choose this rate?