Question

ou are given information about potential investment projects for a firm called Nashbar Bicycle in the table below:

Project	Total Investment ($)	Expected Rate of Return (%)
Remodel Distribution Center	400,000	18
New Notebooks for Sales Staff	500,000	22
On-site Day Care Center	200,000	10
Employee Fitness Center	100,000	8

If the market interest rate is at 9%, Nashbar Bicycle’s total investment from the projects it would undertake to earn economic profits would be ___ .

Answer 1

Solution :-

As the Market Interest Rate = 9%

So  Nashbar Bicycle’s should make investments in the Project that has a rate of return greater than or equal to 9%

So Here we see  Nashbar Bicycle’s can choose all the Projects except Employee Fitness Center .

So Nashbar Bicycle’s total investment from the projects it would undertake to earn economic profits would be =

= ( $400,000 + $500,000 + $200,000 ) = $1,100,000

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answered by: anonymous