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Consider an economy with a large number of potential online game providers. The provider lacks the funds to start their projects. There is an equal number of investors who have the funds but no desire to create online games. Each investor has 10 goods to invest. Each online game requires 20 goods to create. Suppose each investor can choose up to 10 online games. Assume that 25 percent of the online game projects fail and return zero goods to the investor. The monitoring cost is 1 good per failed project.
a. Compute the expected total return for each investor when the investor chooses 10 projects and divides to goods evenly amongst all 10 projects.
b. Compute the expected total return for each investor when the investor chooses one project.
c. Explain why the expected total return is greater when only one project is funded by the investor.
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A project that costs $69,215.00 to install will provide annual cash flows of $20,000.00 for each of the next 12 years. Calculate the NPV if the discount rate is 29.10%? How high can the discount rate be before you would reject the project (i.e. What ..
Emily is in the 25% bracket and has $15,000 available for investment during her current tax year. Assume that she remains in the same tax bracket over the next 7 years and determine the accumulated amount of her investment if she puts the $15,000 int..
The great, great grandparents of one of your classmates sold their factory to the government 104 years ago for $150,000. If these proceeds had been invested at 6%, how much would this legacy be worth today? Assume annual compounding.
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