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Suppose you are the CEO of a firm and are considering investing this year's profits into expanding the firm. If you invest, this year's profit

Suppose you are the CEO of a firm and are considering investing this year's profits into expanding the firm. If you invest, this year's profit would shrink to $175,000, but raise to $600,000 in the next year. If you do not invest, you will have constant profits of $300,000 each year. If the interest rate is 5%, what is the present value of profits for this company if it doesn't invest? What is the present value of profits if the firm invests? Should the firm invest?

Present value of profits if the firmsdoesn'tinvest: $

Present value of profits if the firmdoes invest: $

Should the firm invest?

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