What is maximal value of firm, Finance Basics

Suppose an entrepreneur owns a firm that has a production technology that generates the following revenue: R(e) = e2+100e where revenue depends on his effort level e. The monetary cost of effort is given by: C(e)= 2e2 The entrepreneuer is risk neutral and maximixes his expected utility.

(a) What is the maximal value (profit) of the firm?

(b) Suppose the entrepreneur sells 100% equity. After selling the firm, what effort level does the entrepreneur choose? What is the value of the firm?

(c) Suppose the entrepreneur sells β% equity. What effort level does the entrepreneur choose? Is it efficient?


Posted Date: 3/29/2013 5:16:35 AM | Location : United States

Related Discussions:- What is maximal value of firm, Assignment Help, Ask Question on What is maximal value of firm, Get Answer, Expert's Help, What is maximal value of firm Discussions

Write discussion on What is maximal value of firm
Your posts are moderated
Related Questions
Question 1: a) Explain the framework put forward by the Basel Committee to ensure that banks and supervisors give appropriate attention to the second (supervisory review) and

Prepare Journal and Adjusting Entries I need assignment help on topic Prepare Journal and Adjusting Entries. Can you please suggest me the answer. The following two events o

EOQ Assumptions The basic EOQ model creates the following supposition as: i) The demand is identified and constant over the year ii) The ordering cost is con

Why are financial institutions heavily regulated, with specific focus on their ability to increase or reduce the money supply?

Cash Management Techniques The basic strategies that must be employed via the business firm in managing its cash are as: i) To pay account payables as behind as possible wi

Identify one each (1) benefit, (2) disbenefit, and (3) monetary cost that would impact each of the following projects: a.A new electrical distribution station in a developing pa

What factors would affect company consider in choosing option for capital-raising

List and describe the three career opportunities in the field of finance. Finance has three major career paths that are financial management, financial markets and institutions

The Genesis operations management team, nearing completion of its agreement with Sensible Essentials, was asked by senior management to present a capital plan for the operating exp

Important Points - Creditors Finances When by using creditor's finances a company must consider: 1. That cost of finance is less than the Return that implies the rate shoul