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A venture capitalist named Kevin is considering a pitch from an entrepreneur who has invented a smart toaster, which is a wifi-enabled cooking appliance that alerts users via text-message when their toast is ready. The entrepreneur has submitted an application for a utility patent, which will take a year to process. The investment will cost Kevin $20,000 today, and if the patent is awarded, Keven will receive a payout of $44,000 one year after he makes his investment. If no patent is awarded, however, Keven receives nothing. Kevin believes there is a 60% chance the patent will be awarded. Assume the market interest rate is 10%. a. Calculate Kevin’s net present value of making the investment today, accounting for the uncertainty in the future return. Notice that the costs of making the investment today are certain, but the benefits are uncertain. b. Considering your answer to (a), should Kevin make the investment today? Assume he is risk-neutral when formulating your answer. c. Calculate the net present value (today) of waiting for the patent to be processed before deciding whether to make the investment. Note that in this case, both the costs and the benefits of the investment are uncertain today. d. What is the option value of waiting? Should Kevin make the investment today or wait until next year?
the following is a labor supply functionwage per
Suppose a widget manufacturer has an infinitely substitute production function, q=3L+2K, given that MPL= 3, MPK= 2. If both the wage rate and rental rate are $10. What is the cost-minimizing combination of L and K to produce 60 units of output. How m..
What price will the firm charge in each market? Based solely on these two prices, which market has the higher price elasticity of demand? What will be this monopolist's total economic profit?
A monopolist is deciding how to allocate output between two geographically separated markets. What are price, output, prots, marginal revenues, and deadweight loss if. the monopolist can price discriminate? if the law prohibits charging deferent pric..
Using the Internet, research the influenza vaccine, or "flu shot." Use the following to guide your research: What are the economic benefits of the flu shot? Describe one (1) reason why the private market for flu vaccinations would produce an ineffici..
A firm has the following relationship between the number of employees it has (E) and its daily output: Employees (E) output APE MPL VMPE 0 0 1 50 2 60 3 68 4 74 5 78 6 80 In the table above, calculate and enter the average products of labor (APE).
The larger the positive cross elasticity coefficient of demand between products A and B, the: We would expect the cross elasticity of demand between Skippy and Jif peanut butter to be:
q1. foreign workers make up roughly 90 of united arab emirates uae population. if you compare uaes gdp with its gnp
Clearly explain the implication of the crowding-out effect on the link between government deficits, interest rates and inflation?
Two economies are identical except that the level of capital per worker is higher in Highland than in Lowland. The production functions in both economies exhibit diminishing marginal product of capital. Which economy will experience higher output per..
A 15-year Treasury bond as a face value of $1,000, price of $928 with a $30 coupon payment. Assume the price of this bond increases to $936 over the next year. The one-year holding period return is equal to 2.35% 5.72% 4.09% 3.40%
Suppose you consume nothing but goods X and Y. We have two years.
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