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Suppose an entrepreneur owns a firm that has a production technology that generates the following revenue: R(e) = e²+100e where revenue depends on his effort level e. The monetary cost of effort is given by: C(e)= 2e² The entrepreneuer is risk neutral and maximixes his expected utility.

(a) What is the maximal value (profit) of the firm?

(b) Suppose the entrepreneur sells 100% equity. After selling the firm, what effort level does the entrepreneur choose? What is the value of the firm?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9533102

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