1.) Which of the two earnings streams do you prefer? [Hint: Choose any positive time-value of

money. Say 10 percent.] Please tell me why and please show your work.

Year 1 2 3 ____4 _

Stream A: $850 $750 $750 $850

Stream B: $800 $800 $800 $800

2. ) Mr. Golden A. Halo, an elderly alumnae of SU, has been thinking about establishing a trust fund for

his granddaughter’s SU tuition. He plans to make equal, annual payments, beginning four years

from today, into an account that will yield 8 percent per year. If he makes seven payments, how

much will each have to be so that his granddaughter will have $80,000 to begin her SU studies in

eleven years? [Hint: An end of period or beginning of period problem? Draw a good time line!!]

3.) Assume you are willing to pay $176.57 for a share of PDQ common stock. The company pays an

annual dividend (not quarterly, which is normal). The current dividend is $12.00. What is your

required rate of return (i), if you believe the annual dividend will be $14.76 in the next seven years?

[Hint: What is the implied growth rate for the corporation and the dividend? See time/value of

money tables.]

Subject | Mathematics |

Due By (Pacific Time) | 04/02/2015 12:00 pm |

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