$5$

Part II: Short Answer

Question $1$: $(4$ points$)$

You are considering whether to invest in a project. The project has an immediate cost of $$4,000.$ Each year, this project would pay $$100,$ starting one year from now, and these payments would continue forever.

a$)[2$ points$]$ If the interest rate is $5\%,$ what is the net present value of this project? Should you invest?

b$)[2$ points$]$ At what interest rate i would you be indifferent between investing and not investing in this project?