Example 2: The Best Investment Company must determine how much debt and investment it needs to take on in the next year. Each dollar invested reduces the NPV of the company by 5 cents and each dollar of debt increases the NPV of the company by 50 cents. The Best Investment Company can invest 500,000 dollars. Debt can at most be 40% of investments and has 300,000 dollars currently available. All investments are made with current cash or borrowed money. How does the Best Investment Company maximize its NPV?
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