Question: Q1) a) (5 marks) Provide one reason why the degree of market efficiency may differ across countries. b) (10 marks) Suppose your firm is considering

Q1)

a) (5 marks) Provide one reason why the degree of market efficiency may differ across countries.

b) (10 marks) Suppose your firm is considering a new system of inventory management. The new system will cost $10 million today (year 0), but it will decrease the amount of inventory you have to keep starting immediately. More specifically, the current inventory requirement is 20% of next year's sales. The new system will reduce your inventory requirement to 10% of next year's sales forever. Suppose that the sales are 50 million in year 1, and they grow at rate 5% in perpetuity. Assuming that the tax rate is 0, what is the Internal Rate of Return of the new system?

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