1. You can buy a car for $40,000 cash and receive $2,500 cash-back or pay the total in 48 monthly instalments with 0% financing. Which option would you prefer if the market rate of interest 4% APR, compounded quarterly.
2. Stark Corporation have just paid a $20 dividend. The dividend will grow at an annual rate of 6% and 7% alternatively forever. That is, the growth rate of the dividend will be 6% next year (end of year 1), 7% the year after, followed by 6%, and so on. What is the current share price if the required return is 10%?
3. What is the present value of an annuity that pays $1000 at the end of each year for 10 years starting from the end of year 1, with a discount rate equal to the growth rate of 10%?