Given the cost function find out the government bonus, present value.
A firm estimates that the cost (in millions of $) of developing and introducing a new product over t years equals C = 500 - 20t + t2. Present value revenues related to time t are estimated at R = 750 + 35t - 1.5t2. The firm knows that the new product cannot be completed before 6 years.
Assume the government offers a $10 million every-year bonus for early development. Illustrate what is the optimal project duration under this scenario?