1. You have just won the lottery and will receive $530,000 in one year. You will receive payments for 27 years, which will increase 3 percent per year. The appropriate discount rate is 11 percent.
Required: What is the present value of your winnings?
2. Company X has a debt-equity-ratio of 2.5, sales of $350 million, and NOI of $46.5 million. Company Z has a debt-equity-ratio of 3.6, sales of $525 million and NOI of $76 million. Company Z has a total capitalization of $2.4 billion, whereas Company X is only 25% as large. Which company has the higher ROE? (Please show the calcualtion steps)
a) Company X
b) Company Z
c) Not enough info to calculate