Macroeconomics 11th Edition by Michael Parkin

Exercise 8

Use the following information to work Problem.
First Call, Inc., is a cellular phone company. It plans to build an assembly plant that costs $10 million if the real interest rate is 6 percent a year. If the real interest rate is 5 percent a year, First Call will build a larger plant that costs $12 million. And if the real interest rate is 7 percent a year, First Call will build a smaller plant that costs $8 million.
First Call expects its profit from the sale of cellular phones to double next year. If other things remain the same, explain how this increase in expected profit influences First Call's demand for loanable funds.