What is the net present value for his investment decision

Assignment Help Microeconomics

Reference no: EM133411883

Assignment:

1. Vincent is deciding whether to buy a painting. The current sale price of the painting is 100 dollars. The resale price of the painting after T years is 100 + T dollars, where T is a positive integer. Ownership of the painting generates a psychological benefit of 10 dollars per year, where the benefit is received at the end of each year. Assume that the discount rate is r = 0.10.

(a) Suppose that Vincent buys the painting. What is the earliest year after which he should sell the painting? [Hint: maximize the net present value with respect to the year after which he sells the painting.]

(b) Suppose that Vincent sells the painting as in part (a). What is the net present value for his investment decision?

(d) Suppose instead that Vincent cannot sell the painting after purchase. What is the internal rate of return on the investment in the painting?

Reference no: EM133411883

Questions Cloud

Explain the importance of developing metrics and kpis : Explain the importance of developing metrics and KPIs in logistics and supply chain operations.

Compare and contrast the three different categories : Compare and/or contrast the three different categories (i.e., trunk, supplemental, and local-service) of air carriers prior to deregulation.

How the parable of sower found in mark : Explain how the Parable of the Sower found in Mark

What is the percentile of this distance : what is the percentile of this distance? Consider the commuting distance data above (# 4 problem) Compute upper limit (UL) and lower limit(LL)

What is the net present value for his investment decision : Suppose that Vincent sells the painting as in part (a). What is the net present value for his investment decision?

Differences between pharisees-sadducees and essenes : We encounter various Jewish sects in reading the New Testament. Describe the major differences between the Pharisees, Sadducees, and Essenes.

What is an appropriate way to test : What is an appropriate way to test for whether two treatments/exposures have different effects over time, given longitudinal data on a continuous outcome

What is the vera bradley current mission statement : What is the Vera Bradley's current mission statement? Has it changed or remained the same through the years? How well does it accomplish the ideals of a good

What is the probability distribution of the random variable : What is the probability distribution of the random variable "number of daughters in a family of 3 children"?

User Account

All Pages