Question: 5. There are two mutually exclusive projects. Project A requires $480,000 initial investment and is expected to provide $120,000 incremental net cash inflows for 5

5. There are two mutually exclusive projects. Project A requires $480,000 initial investment and is expected to provide $120,000 incremental net cash inflows for 5 years. Project B requires $950,000 initial investment and is expected to provide $200,000 incremental net cash inflows for 5 years. Which project should you accept according to IRR method if your cost of capital is 5%

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=+productivity depends on growth in total factor productivity and growth in the capitallabor ratio. In particular, show that D1Y/L2 Y/L = DA A + a D1K/L2 K/L .

=+ Hint: You may fi nd the following mathematical trick helpful. If z = wx, then the growth rate of z is approximately the growth rate of w plus the growth rate of x. That is, z/z w/w + x/x.

=+ 3. Suppose an economy described by the Solow model is in a steady state with population growth n of 1.8 percent per year and technological progress g of 1.8 percent per year. Total output and