Consider the Following Four Investment Projects: Consider Each of the Following

question 3

Essay

Consider the following four investment projects: Consider each of the following questions independently:
a) Suppose that the firm has only $3,500 available at period 0. Neither additional budgets nor borrowing are
allowed in any future budget period. However, you can lend out any left funds (or available funds) at 10%
interest per period. If you want to maximize the amount of cash available at period 3, which project(s) would
you select? What is the total amount of cash available at the end of period 3? No partial projects are allowed.
b) Suppose in (a) that, at period 0, you are allowed to borrow $500 at an interest rate of 13%. The loan has to be
repaid at the end of year 1. Which project(s) would you select to maximize the total amount of cash available at
period 3?

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Definitions:

Variable Demand

A situation where the demand for products or services fluctuates over time, affected by various factors such as seasonality, market trends, or economic conditions.

Lead Time

The amount of time that passes from the start of a process until its completion, often used in manufacturing and project management.

Standard Deviation

A measure of the dispersion or variability in a set of data points, indicating how spread out the values are from the mean.