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
Food and Beverages Rooms, Restaurants and Other Services Other Income Total $ $ $ Sale

Which of the following is not considered to be an investment objective

Basic EOQ Model The basic inventory decision model is Economic Order Quantity or called EOQ model. This model is specified via the following equation as: Whereas:Q is


Advantage of Leasing an Asset 1. The company has the choice to purchase assets on the expiry of the lease period at that time it will identify the viability of the asset

Types of jobbers in Stock Market There are three kinds of jobbers as: a) Bulls A jobber buys shares while prices are down and hold them in anticipation such t

Matching Approach - Financing Current Assets This approach is further referred to as the hedging approach. Beneath this approach, the firm adopts a financial plan that involve

Stock Market Index Definition of Stock Market Index An index is a numerical figure that measures relative change in variables between two type of durations. Examples

Marbela Corporation's stock had a required return of 12.75% last year, when the risk-free rate was 6.4% and the market risk premium was 5.5%.  Now suppose the market risk premium d

PBP Reciprocal PBP expresses the profitability of a project in terms of years.  It does not indicate any return as measure of investment. The PBP reciprocal has been utilized