Tom only has enough fabric to make 250 purses. He needs to figure out how many purses to make this year (period 0) and next year (period 1). He predicts the inverse demand function for the current period to be: P=7502Q0, and the inverse demand function for next year to be: P=12502Q1. She anticipates that the same function, C=250+100Q, can describe her costs in each period. Tom seeks to maximize profit and assumes an interest (discount) rate of 3%.

What is the present value of Tom's total expected profit?

What happens to the quantity of purses Tom produces this year when he uses a 5% interest rate instead of 3%