Question: A new tablet computer from the R&D department will earn $20,000 in revenue in one year, which will then grow by 20% each subsequent year.

A new tablet computer from the R&D department will earn $20,000 in revenue in one year, which will then grow by 20% each subsequent year. Suppose an interest rate of 5% per year and a horizon of 20 years. What is the cutoff value for the initial investment that would make this project worthwhile?

(i) Compute the answer using the formula

(ii) Compute the answer using a spreadsheet

(iii) If we change the interest rate, the cutoff value will change.

Draw a plot of the cutoff value versus interest rate?

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