1. An entrepreneur invests $139,752.00 into a start-up business today. He expects the business will generate $61,555.00 per year for 10.00 years, and then it will generate $128,878.00 per year for the following 20.00 years. Suppose he wants a 8.00% annual return to run the business.
What is the value of this business today if his forecasts are accurate? (HINT: Discount all cash flows to today and subtract start-up investment.)
2. An account pays interest by the quarter. It pays at a rate of 6.80% APR with quarterly compounding. However, an investor would like to contribute once a year to the account. At the end of each year, an investor will contribute $10,000.00. What will be the future value of this account in 20.00 years?