Investment project and estimation of economic

Reference no: EM1317233

1. Determine which of two investment projects a manager should choose if the discount rate of the firm is 10 percent. The first project promises a profit of $100,000 in each of the next four years, while the second project promises a profit of $75,000 in each of the next six years.

2. Determine which of the two investment projects of Problem 1 the manager should choose if the discount rate of the firm is 20 percent.

3. A woman managing a photocopying establishment for $25,000 per year decides to open her own duplicating place. Her revenue during the first year of operation is $120,000, and her expenses are as follows:

Salaries to hired help	$45,000
Supplies	$15,000
Rent	$10,000
Utilities	$1,000
Interest on bank loan	$10,000

Calculate (a) the explicit costs, (b) the implicit costs, (c) the business profit, (d) the economic profit, and (e) the normal return on investment in this business.

Reference no: EM1317233

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