1. A company generates $92,336.00 in cash flow per year. If investors want a 10.00% annual return to buy the company, how much are they willing to pay? Let’s assume the company will last forever for valuing the opportunity.
2. A loan shark offers $9,736.00 today in exchange for paying him $1,277.00 per year forever. What is the annual rate of interest on this “loan”?
3. In general, shareholders prefer _________ than bondholders do. (Hint: Think about the FedEx example in the online discussion.)
a. safer projects
b. riskier projects
c. more government regulation
d. higher CEO pay lower CEO pay