Prove Proposition 1.1.2. Data From Proposition 1.1.2:- It is rational to invest in a project if its

Prove Proposition 1.1.2.

Data From Proposition 1.1.2:-

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It is rational to invest in a project if its net present value is positive. This is simply another way of saying that the optimal level of invest- ment is e*. By construction, this is also equivalent to saying that one should invest in a project if its marginal rate of return is at least equal to r. A corollary of this proposition is that the optimal level of investment is the one that maximizes the present wealth of the agents or, in other words, is the level of investments that maximizes their capacity to generate higher levels of consumption from the pair (X, Y) for both periods.