5. Marko, Inc., is considering the purchase of ABC Co. Marko believes that ABC Co. can generate cash flows of $5,700, $10,700, and $16,900 over the next three years, respectively. After that time, they feel the business will be worthless. Marko has determined that a rate of return of 11 percent is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Co.?

A. $24,457.63

B. $27,560.91

C. $35,797.50

D. $26,176.63

E. $33,300.00 8. Assuming an interest rate of 5.4 percent, what is the value of the following cash flows five years from today?

Year Cash Flow

1 $ 3,315

2 4,475

3 5,405

4 6,640

________________________________________

A. $21,903.37

B. $22,334.02

C. $21,189.77

D. $22,616.97

E. $21,440.66 18. Your grandparents would like to establish a trust fund that will pay you and your heirs $200,000 per year forever with the first payment 11 years from today. If the trust fund earns an annual return of 3.9 percent, how much must your grandparents deposit today?

A. $3,497,920.33

B. $5,128,205.13

C. $4,733,727.81

D. $4,273,504.27

E. $3,240,252.23 13. You've just joined the investment banking firm of Dewey, Cheatum, and Howe. They've offered you two different salary arrangements.

Option I: You can have $6,700 per month for the next two years, or,

Option II: You can have $5,400 per month for the next two years, along with a $35,000 signing bonus today. If the interest rate is 7 percent compounded monthly, what amount of signing bonus would make you indifferent between two arrangements? (Calculating Annuity Present Values)

A. $ 29,035.63

B. $ 5,964.37

C. $ 25,000

D. $ 0

E. $10,509 14th EditionDonald E. Kieso, Jerry J. Weygandt, Terry D. Warfield1,471 solutions

9th EditionAlan J. Marcus, Alex Kane, Zvi Bodie689 solutions

11th EditionClaudia Bienias Gilbertson, Debra Gentene, Mark W Lehman1,009 solutions

4th EditionDon Herrmann, J. David Spiceland, Wayne Thomas1,097 solutions