The SaferGlass Co. makes windshields for the automotive industry. It wants to develop a new product with shatterproof glass to increase safety. The development of the new glass requires them to change their production process significantly. The company has developed a list of possible ways of implementing the production process changes, along with estimates of how each would affect the production and sales costs. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain social rate of return. Every investment in R&D would have an additional 3% social return: that is, an investment that pays at least a 4% return to the glass company will pay at least 7% return for society as a whole.

If the opportunity cost of financial capital for SaferGlass Co. is 9%, the company will invest _______
In R&D if it receives only the private benefits of this investment.

Question

The SaferGlass Co. makes windshields for the automotive industry. It wants to develop a new product with shatterproof glass to increase safety. The development of the new glass requires them to change their production process significantly. The company has developed a list of possible ways of implementing the production process changes, along with estimates of how each would affect the production and sales costs. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain social rate of return. Every investment in R&D would have an additional 3% social return: that is, an investment that pays at least a 4% return to the glass company will pay at least 7% return for society as a whole.

If the opportunity cost of financial capital for SaferGlass Co. is 9%, the company will invest _______
In R&D if it receives only the private benefits of this investment.

Quizplus · Accepted Answer

The Answer of The SaferGlass Co. makes windshields for the automotive industry. It wants to develop a new product with shatterproof glass to increase safety. The development of the new glass requires them to change their production process significantly. The company has developed a list of possible ways of implementing the production process changes, along with estimates of how each would affect the production and sales costs. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain social rate of return. Every investment in R&D would have an additional 3% social return: that is, an investment that pays at least a 4% return to the glass company will pay at least 7% return for society as a whole.

If the opportunity cost of financial capital for SaferGlass Co. is 9%, the company will invest _______
In R&D if it receives only the private benefits of this investment.