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What is the optimal investment that maximizes npv

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Reference no: EM132471704

1) Consumer A has access to a perfect capital market with interest rate r=0.15 (15%) per period. She has the opportunity to purchase a private asset for price P. If she purchases the asset, she will be able to invest any amount z => 0 in this asset. If she invests z => 0 now, the asset will return R(z)=250*?z?? next period.

What is the largest amount P that Anna would be willing to pay for the private asset? (Hint what is the net present value, NPV(z) of the private investment opportunity? What is the optimal investment z& that maximizes NPV(z)?

Reference no: EM132471704

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