Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Continuous entrepreneurial effort; liquidity needs:-
(i) An entrepreneur with initial cash A and protected by limited liability wants to invest in a fixed-size project with investment cost I > A. After the investment is made, the entrepreneur chooses the probability p of success (0 ≤ p ≤1) the disutility of effort is(The entrepreneur enjoys no private benefit in this model.)
In question (i) only, the profit isin the case of success and 0 in the case of failure. (We assume that R an expected rate of interest equal to 0 and everyone is risk neutral. Let Rb denote the entrepreneur's reward in the case of success. Solve for the optimal contract (Rb). Show that
(ii) Now introduce an intermediate liquidity shock ρ (for a now arbitrary level A of cash on hand). The cumulative distribution of ρ is F(ρ) on [0, ∞) and the density f (ρ). The effort decision is made after the value of ρ is realized and, of course, conditional on the choice of continuing (incurring reinvestment cost ρ). Suppose that the entrepreneur's stake in the case of continuation (Rb) is independent of ρ. Write the investors' breakeven condition. Write the optimization program yielding (Rb, ρ∗), where ρ∗ is the cutoff liquidity shock.
Sam is currently 30 years of age. He owns his own business and wants to retire at the age of 60. He has little confidence in the current Social Security system. He wants to retire with an annual income of $ 72,000 a year. How much does he have to acc..
A hospital incurs $10 million of cost to treat Medicaid patients and receives $7 million in payment. Actual charges for these Medicaid patients were $20 million. The net community benefit expense that would be reported in Schedule H of IRS Form 990 w..
You purchased a zero coupon bond one year ago for $173.85. The market interest rate is now 9 percent. If the bond had 20 years to maturity when you originally purchased it, what was your total return for the past year? Assume semiannual compounding.
Ethier Enterprise has an unlevered beta of 1.15. Ethier is financed with 55% debt and has a levered beta of 1.65. If the risk free rate is 6% and the market risk premium is 5%, how much is the additional premium that Ethier's shareholders require to ..
In the context of software development projects, a program manager was faced with the following choice last year: He had to option of going with a vendor who proposed a bid which was partly based on future integration costs that were beyond their con..
Suppose you decide to start a business that recruits students for summer jobs? you will match available students with available jobs? You need to learn what positions are available and what students are filling those positions. analyze the structure ..
Consider the following cash flows: What is the IRR of the above set of cash flows? Your coin collection contains 57 1952 silver dollars.
What would be the WACC given the following: all debt will be from the sale of bonds with a coupon of 10% (assume no flotation costs), preferred stock's associated cost will be 13%, and common equity will be from retained earnings with an associated c..
You are planning to invest $2,500 today for three years at nominal interest rate of 9 percent with annual compounding. What would be the future value of your investment? Now assume that inflation is expected to be 3 percent per year over the same thr..
How much will the client be able to withdraw each year of retirement, if the client wants to leave an amount equal to 20% of the starting amount of the retirement account on day retires (so 20% of $6,075,465), to heirs upon his death which he assumes..
Why are only suf?ciently large blockholders expected to monitor management? Whereas the United States and the United Kingdom have a large and active takeover market.
Rational investors ________ fluctuations in the value of their investments.
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd