1. Marko, Inc. is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,200, $10,200, and $16,400 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a rate of return of 14 percent is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.?
1. $35,139.00
2. $31,800.00
3. $21,442.51
4. $25,063.24
5. $23,479.51
2. The MerryWeather Firm wants to raise $13 million to expand its business. To accomplish this, the firm plans to sell 20-year, $1,000 face value zero-coupon bonds. The bonds will be priced to yield 7 percent. What is the minimum number of bonds the firm must sell to raise the $13 million it needs? Use annual compounding.
A. 31,328
B. 50,306
C. 25,153
D. 62,656
E. 13,000