a) An ambitious young graduate wants to purchase a BMW SUV in four years. The cost in four years will likely be $86,934.00. The graduate will try to save the entire price of the car and pay cash to the dealer. To save the money, the young graduate will save $10,937.00 per year. The graduate can earn 8.00% APR on his investments. How much MORE money will the graduate need in four years to buy his dream car?
b) As an entrepreneur, you approach a venture capitalist seeking cash for funding your business. He does not want any equity in your firm, but instead he wants a yearly royalty forever. He wants a 7.00% royalty on your yearly revenues after the deal. You project to generate annual revenues of $108,000.00. The venture capitalist wants a 27.00% return on all his investments. What is the yearly cash flow from this deal for the venture capitalist?