Question: Write down the value of thefirmwhen the production function is Y2 = F(K2 , L) with L= 1,and thecapitalstock in thesecond period is given by

Write down the value of thefirmwhen the production function is Y2 = F(K2

, L) with L= 1,and thecapitalstock in thesecond period is given by K2 = I1 + (1 − δ)K1

. How does theinitialand given stock of capital in thefirst period affect thefirm’s value? The depreciation rate? The rate of investment?

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