A local government can spend $800 today on a project that will yield $968 of benefits two years from today.

(i) If the interest rate is 4%, what is the present value of the project?
(ii) For what interest rates would it be beneficial for the government to pursue the project?


(i) The present value of the project is



(ii) Solve the inequality to show that the project has a positive present value whenever the interest rate (which is assumed to be positive) is less than 10%.

Economics

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