Question
This problem is about the model of Myers and Majluf (1984). Suppose that we are given the following data: = 0.25, H = 5, L
This problem is about the model of Myers and Majluf (1984). Suppose that we are given the following data: = 0.25, H = 5, L = 2, I = 1.0, R = 1.25, r = 0.1.
(a) Find the equilibrium of the game between the manager of a firm and the investors.
(b) What is the market value of the firm before and after the firm announces the issuing of new shares?
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Introductory Econometrics A Modern Approach
Authors: Jeffrey M. Wooldridge
2nd Edition
0324113641, 9780324113648
