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Q2 Consider a world with two periods t = 0, 1, perfect capital markets and no unce Sama tha and Watson have each inherited,50% of

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Q2 Consider a world with two periods t = 0, 1, perfect capital markets and no unce Sama tha and Watson have each inherited,50% of the shares of the Nova Corporation from their parents who founded the company. This is the only wealth they have, i.e. the only payments they receive at dates O and 1 are from the Nova Corporation. Suppose in they can lend and borrow itially that as much as they like at the bank at 11 percent. The Nova Corporation has $10 million on hand to undertake investments. It has 4 projects available to it The costs at date 0 and payoffs at datel are shown below. Cost at t-0 Payoff at t-1 Project A 150,000 $2,420,000 0i0 12 Project B | $1,140,000 | $1,360,000 2x.2i Project C $2,470.000 $2,700,000 33 Project D | $2.560.000 | $2.735,000- hgbey uppose that at date 0 the Nova Corporation pays out all that is left over from the $10 million after undertaking thei V). At date 1 it paysfout all the payoffs m these projects. How much can Samantha consume at date 1 if she coysumes $2 million at date 0

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