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!
Suppose an entrepreneur owns a firm which has two production opportunities. Technology A generates an output (net profit) of 10 in state 1, an output of 20 in state 2, and an output of 90 in state 3. All states are equally likely. Technology B generates an output of 40, 50, and 60, respectively. Because of technological constraints, the entrepreneur can only implement one technology. The entrepreneur maximizes his expected utility.
(a) Which technology should the entrepreneur implement and what is the value of the firm?
(b) Suppose the firm has debt with face value 12 outstanding. What project does the entrepreneur implement?
(c) Suppose the firm has debt with face value 50 outstanding. What project does the entrepreneur implement?
(d) Determine the utility of the entrepreneur as a function of face value D for technology A and B, respectively.
(e) What is the maximal debt level such that the entrepreneur still chooses the (socially) efficient technology?
(f) Suppose the firm only has equity and 98% of shares are owned by retailed investors and the initial entrepreneur owns 2% of the firm. What technology does he implement?
Important Points for Shareholders and Creditors 1. In raising capital, the borrowing firm will constantly question the financial securities in form of preference shares
objectives
A compnay can arrange for a secured loan amounting to 150,000,000 for one year at an interest rate of 18% per annum based on the initial balance of the loan. The lender also imposs
Type of Partnerships There are two main kinds of partnerships. Namely: Ordinary Partnership - An ordinary partnership is one in which all members have unlimited liability.
1. Determine what is the future value of $20 a week for 10 (ten) years at 6 percent interest? Assume the first payment takes place at the end of this week. 2. Kristina started
1. Find the price of the following bonds. They are all risk-free, and the risk-free rate is 10%. (a) A fifteen-year zero coupon bond with face value $1,000. (b) A three year
how ca i calculate the common stock dividends in the income statement if it is not mentioned
Why are financial institutions heavily regulated, with specific focus on their ability to increase or reduce the money supply?
Partnership Deeds This is an important document which governs the members in partnership firm. It covers among other things the following points: i. The name, location,
Venture Capital Venture capital is a form of investment in new small risky enterprises utilized to get them started via specialists called venture capitalists. Venture capital
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: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd