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Hirshleifer Model Formulas Finance ●C0 = CF0 − I0 + borrowed amount or − lended amount ●amount borrowed = C0 − CF0 − I0
●C1 = CF1 + OF−
’ repayment ” ●I0 = EA = Initial investment, can be invested in real projects ●CF0 = OA − CF1/(1 + r) ●CF1 = OB − CF0 ∗ (1 + r) ●OG = C0 + C1/(1 + r) ●OG = OH/(1 + r)
●OG = OA + AG
●OG = Maximum consumption at t = 0 ●OA = Present value of financial wealth ●OA = CF0 + CF1/(1 + r)
●OA = OG − AG
●AG (NPV) = PV investment − I0 = EG − EA
●AG (NPV) = −E OF/(1+r) Note: EA is negative, because it is an
investment ●OF = EG ∗ (1 + r) ●OF = payment investment
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