Question: 5. KEY QUESTION Answer the lettered questions in the next column on the basis of the information in this table: Amount of R&D, Expected rate

5. KEY QUESTION Answer the lettered questions in the next column on the basis of the information in this table:

Amount of R&D, Expected rate of millions return on R&D, %

$10 16

$20 14

$30 12

$40 10

$50 8

$60 6

a. If the interest-rate cost of funds is 8 percent, what will be the optimal amount of R&D spending for this firm?

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