A firm decides to pay total dividends of $100,000 in period 1 and $470,000 in period 2. Charlie o...
A firm decides to pay total dividends of $100,000 in period 1 and $470,000 in period 2. Charlie owns 10% of the firm and has no other wealth or income. What is Charlie’s maximum period 1 consumption (C1) if the market rate of return (i) is 10.00% and he plans to consume $10,000 in period 2 (C2)? a. $50,400.00 b. $103,363.00 c. $43,630.00 d. $518,181.00 e. $133,634.00
Homework Answers
Maximum period compensation = $43636 (option c)
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A firm decides to pay total dividends of $100,000 in period 1 and $470,000 in period 2. Charlie o...
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Problem 1 (2.5 marks). Suppose there are only two time periods, today (period 1) and tomorrow (period 2), and only one consumption good, let's call it food. Assume that food is a perfectly divisible good. Let ci and c2 denote the amount of food consumed today and tomorrow, respectively. Note that here we use subscripts to denote time periods. The price of food today is equal to Pi = P, but as the rate of inflation is > 0, the...
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