Suppose a Firm Anticipates That a Particular R&D Expenditure of $20

Multiple Choice

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

A) not undertake the R&D expenditure if its interest-rate cost of borrowing is 8 percent.
B) undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent.
C) undertake the R&D expenditure if its interest-rate cost of borrowing is 20 percent.
D) undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent.