Question

Enrique Rodrigues has $54,300 this year, as represented by point A. He has the opportunity to make an investment in productive assets represented by point B in the following figure. He wants to consume $25,000 this year and $60,000 next year. This pattern of consumption is represented by point F. By borrowing or lending, he will be able to reach any point along the line DBC.
a. What is the market interest rate?
b. How much must Enrique invest in financial assets and productive assets today if he follows an optimum strategy?
c. What is the stand-alone NPV of the investment at point B?


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  • CreatedJune 17, 2015
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