1. A reputable software companys common shares are selling for $55. They are expected to pay a quarterly dividend of $1.50 per share and dividends should grow at a rate of 6% annually.

What is your required rate of return on investment on these common shares?

[Show detailed calculation with formula]

2.

Robert Cheung has built software and would like to sell all the rights to an automotive company. The company gave him two options, take $200,000 now or receive a royalty of $20,000 a year for the next 15 years, the first payment being made now and subsequent payments being made on the 1^st day of each year.

Which option should Julian accept considering an 8% discount rate? Answer with proper calculation and explanation.