Q: Consider the following financial data for a project:

initial investment : 50,000$

project life : 8 years

salvage value : 10,000$

Anunual revenue : 25,000$

Annual expenses (including income taxes) : 9,000$

(a) What is i* for this project?

(b) If the annual expense increases at a 7% rate over the previous year's expenses,

but the annual income is unchanged, what is the new i*?

(c) In part (b), at what annual rate will the annual income have to increase to maintain

the same i* obtained in part (a)?