You are considering the following two mutually exclusive projects. The required return on each project is 12 percent. Which proj
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Answer:
The US income will be $12,201 and South Korea's income will be $21,911. US income will grow by multiple of 1.2 while South Korea's GDP will grow by multiples of 2.19.
Explanation:
Initial income of both the countries is $10,000.
Growth rate of South Korea is 4%.
Growth rate of US is 1%.
In 20 years, South Korea's income will be,
=Initial income*
=$10,000*
=$10,000*2.1911
=$21,911
Similarly, we can find US income.
=Initial income*
=$10,000*
=$10,000*1.2201
=$12,201
So, South Korea's income is $21,911 while US's income is $12,201.
South Korea's income grows by the multiples of 2.1911. While, US's income grows by the multiples of 1.2201