1. You plan to develop a farmland for motel development. You believe that due to urbanization, the farm land will sell for $ 400,000 at the end of eight years. Your nominal cost of capital for such an investment is 6%. How much should you pay for the land today? Assume, for simplicity, annual compounding and that no other expenses or costs are involved.
2. The 2015 income statement for Duffy’s Pest Control shows that depreciation expense was $194 million, EBIT was $498 million, and the tax rate was 35 percent. At the beginning of the year, the balance of gross fixed assets was $1,568 million and net operating working capital was $414 million. At the end of the year, gross fixed assets was $1,812 million. Duffy’s free cash flow for the year was $411 million.
Calculate the end-of-year balance for net operating working capital. (Enter your answer in millions of dollars rounded to 1 decimal place.)