Problem 1: What is the net present value of the following cash flows at a discount rate on 12%.
Problem 2: You would like to have enough money saved to receive a $100,000 per year perpetuity after retirement so that you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal (assume that perpetuity payments start one year from the date of your retirement. The interest rate is 10%)?
Problem 3: You would like to have enough money saved to receive a growing perpetuity, growing at a rate of 5% per year, the first payment being $100,000, after retirement so that you and your family can lead a good life. How much would you need to save in your retirement fund to achieve this goal (assume that the growing perpetuity payments start one year from the date of your retirement. The interest rate is 10%)?
Problem 4: Macrohard Company expects to pay a dividend of $6 per share at the end of year one, $8 per share at the end of year two and then be sold for $136 per share. If the required rate on the stock is 20%, what is the current value of the stock?