ed construction cost = $70 million variable cost function is: C(q) = c/2 q, where q is the production quantity and c = L000 property price after one year is uncertain. However, you expect that the price should be und $6.5 million with a standard deviation of $1,000. All units are of the same size. Meanwhile, you have a renovation project that needs capital immediately. You figure that 100% of the pre-sale revenue can be invested in that project. The cost of borrowing for you is 10% per year. You consider yourself risk-averse with the coefficient of risk aversion equal to 0.01. a) Determine the quantity of space you'd supply if you are allowed to pre-sell.

ed construction cost = $70 million variable cost function is: C(q) = c/2 q, where q is the production quantity and c = L000 property price after one year is uncertain. However, you expect that the price should be und $6.5 million with a standard deviation of $1,000. All units are of the same size. Meanwhile, you have a renovation project that needs capital immediately. You figure that 100% of the pre-sale revenue can be invested in that project. The cost of borrowing for you is 10% per year. You consider yourself risk-averse with the coefficient of risk aversion equal to 0.01. a) Determine the quantity of space you'd supply if you are allowed to pre-sell.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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