This is a Macroeconomics question.

1.2 The representative rm (30 points) Consider a representative rm identical to the one in the lecture note, except that it can nances its investment in physical capital also through corporate bonds (purchased by the HH). The prot of the rm art is distributed as dividend (it to the HH (who purchases the shares of the rm): 71': Cit: zf(Kt,N:l) thil _ It _ Tthll (1) \\\ "-\ -'v \\v-' Production:Revenue Labor cost Internal IHVGSthIlt Interest rate repayment Where capital evolves according to the following law of motion: Kt+1 = (1 dth + It + Bil 35-1 (2) Internal investment External investment Internal investment refers to the investment in physical capital that the rm can achieve with internal resources (that is, using its own production). External in vestment is the difference between the repayment of the outstanding bond amount Bt_1 and the new bonds B, purchased by the household (as usual, in equilibrium Vt : B? = B: = Br). 1. (10 points) Find It from equation (2) and substitute it out It from equation (1). Give an accounting interpretation of the resulting formula for dividend. 2. (10 points) Recall that the rm maximizes the net present value of dividends on behalf of its shareholder (equation 8 slide 16 in Lecture 7). Write down the net present value of dividends (identical to the one in class) using a discounting rate of rt (the interest rate of bonds). Also, substitute out the formula for dividend you found in part 1 (It shouldn't show up anymore). 3. (10 points) Maximize the net present value of dividends with respect to Kt\