The Table Shows the Rate of Return and R&D Spending

question 173

Multiple Choice

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds falls from 10 percent to 6 percent. What will happen to the optimal amount of R&D spending?

• A)It increases from $24 billion to $36 billion.
• B)It increases from $24 billion to $42 billion.
• C)It decreases from $36 billion to $24 billion.
• D)It decreases from $42 billion to $24 billion.

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