Problem M$1-02($algo$)$

A monopolist earns $$70$ million annually and will maintain that level of profit indefinitely, provided that no other firm enters the market. However, if another firm enters the market, the monopolist will earn $$70$ million in the current period and $$30$ million annually thereafter. The opportunity cost of funds is $16$ percent, and profits in each period are realized at the beginning of each period.

a$.$ What is the present value of the monopolist's current and future earnings if entry occurs?

Instructions: Enter your response rounded to the nearest penny $($two decimal places$).$

$

million

b$.$ If the monopolist can earn $$36$ million indefinitely by limit pricing, should it do so$?$

$$ Yes CiNo