Consider the financial data for a project given in Table P7.12.
TABLE P7.I2
Initial investment............................ $90,000
Project life.................................... 6 years
Salvage value................................. $10,000
Annual revenue............................... $27,000
Annual expenses............................... $8,000
(a) What is i* for this project?
(b) If the annual expense increases at a 7% rate over the previous year's expenses, but the annual income is unchanged, what is the new i*?
(c) In part (b), at what annual rate will the annual income have to increase to maintain the same i* obtained in part (a)?