The financial analysts at Lexmark have evaluated five major projects. Each project, if it actually goes forward, will be financed by going to a bank to borrow the money. They€™ve calculated a €œbreak-even interest rate€: If they can borrow cash to pay for the project at less than that rate, the project will likely be a success; if the rate is higher, then it€™s not worth it.

a. If the interest rate is 11%, which projects will Lexmark take on? If the market interest rate is 6%, which projects will it take on?
b. Let€™s turn the above information into a demand curve for loanable funds.
Organize this data to convert it into Lexmark€™s €œloanable funds demand€ curve. Note: It will look just like an ordinary demand curve, only with more breaks.

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Project A Project B Project C Project D Project E Cost $100 million $50 million $200 million $25 million $150 million Break-Even Interest Rate 8% 12% 50% 4% 10% Interest rate Quantity of loanable funds