CleanAir Motors Inc. wants to build electric cars with no emissions. However, electric motors require innovative battery technology for adequate energy storage to meet basic daily commuting needs. The company has several possibilities for alternative battery technology, along with estimates of how these approaches would affect their costs of producing the cars and their sales of the cars. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain private rate of return. Every investment would have an additional 2% social return: that is, an investment that pays at least a 6% return to the car company will pay at least an 8% return for society as a whole.

If the opportunity cost of financial capital for CleanAir Motors Inc. is 10%, CleanAir Motors Inc. will
Invest _______ in R&D if it receives both the private and social benefits of this investment.

Question

CleanAir Motors Inc. wants to build electric cars with no emissions. However, electric motors require innovative battery technology for adequate energy storage to meet basic daily commuting needs. The company has several possibilities for alternative battery technology, along with estimates of how these approaches would affect their costs of producing the cars and their sales of the cars. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain private rate of return. Every investment would have an additional 2% social return: that is, an investment that pays at least a 6% return to the car company will pay at least an 8% return for society as a whole.

If the opportunity cost of financial capital for CleanAir Motors Inc. is 10%, CleanAir Motors Inc. will
Invest _______ in R&D if it receives both the private and social benefits of this investment.

Quizplus · Accepted Answer

The Answer of CleanAir Motors Inc. wants to build electric cars with no emissions. However, electric motors require innovative battery technology for adequate energy storage to meet basic daily commuting needs. The company has several possibilities for alternative battery technology, along with estimates of how these approaches would affect their costs of producing the cars and their sales of the cars. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain private rate of return. Every investment would have an additional 2% social return: that is, an investment that pays at least a 6% return to the car company will pay at least an 8% return for society as a whole.

If the opportunity cost of financial capital for CleanAir Motors Inc. is 10%, CleanAir Motors Inc. will
Invest _______ in R&D if it receives both the private and social benefits of this investment.