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Suppose a firm expects that a $40 million expenditure on R&D in the current year will result in a new product that can be sold next year. Selling that product next year will increase the firm's revenue next year by $60 million and its costs next year by $54 million. Instructions: Enter your answer as a whole number. a. What is the expected rate of return on this R&D expenditure? percent

Suppose a firm expects that a $40 million expenditure on R&D in the current year will result in a new product that can be sold next year. Selling that product next year will increase the firm's revenue next year by $60 million and its costs next year by $54 million. Instructions: Enter your answer as a whole number. a. What is the expected rate of return on this R&D expenditure? percent

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Suppose a firm expects that a $40 million expenditure on R&D in the current year will result in a new product that can be sold next year. Selling that product next year will increase the firm's revenue next year by $60 million and its costs next year by $54 million. Instructions: Enter your answer as a whole number. a. What is the expected rate of return on this R&D expenditure? percent
Transcribed Image Text:Suppose a firm expects that a $40 million expenditure on R&D in the current year will result in a new product that can be sold next year. Selling that product next year will increase the firm's revenue next year by $60 million and its costs next year by $54 million. Instructions: Enter your answer as a whole number. a. What is the expected rate of return on this R&D expenditure? percent
A firm faces the following costs: total cost of capital = $4,000; price paid for labor = $20 per labor unit; and price paid for raw materials $8 per raw-material unit. Initially, the firm can produce 2,000 units of output by combining its fixed capital with 200 units of labor and 500 units of raw materials. After the firm improves its production process, it can produce 3,000 units of output by combining its fixed capital with 100 units of labor and 500 units of raw materials. %D How will the firm's total costs change as a result of the improved production process? Instructions: Enter your answers as a whole number. Total cost changes from $ 12000 using the original process to $ 2000 O using the improved process.
Transcribed Image Text:A firm faces the following costs: total cost of capital = $4,000; price paid for labor = $20 per labor unit; and price paid for raw materials $8 per raw-material unit. Initially, the firm can produce 2,000 units of output by combining its fixed capital with 200 units of labor and 500 units of raw materials. After the firm improves its production process, it can produce 3,000 units of output by combining its fixed capital with 100 units of labor and 500 units of raw materials. %D How will the firm's total costs change as a result of the improved production process? Instructions: Enter your answers as a whole number. Total cost changes from $ 12000 using the original process to $ 2000 O using the improved process.
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Suppose the firm can get a bank loan at 16% interest to finance is 40 million are in the project will the firundertake the project

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