1. A startup corporation, COOL, has always lost money, but their product is popular with social media users. In a recent IPO, COOL sold its stock to the public for $20 a share. How is it possible for a company that that has never made any money to sell for a positive stock price? Explain.

2. You are saving for retirement and want to figure out how much you will need to save at the end of each year for the next 10 years so that you have $1,500,000 in time 30. The annual discount rate is 7% and you are using monthly compounding for your analysis (even though the payments are annual). Set up a calculation without solving.

3. Xtra Corp. stock is selling for $40 per share. The company has $1 million in cash to pay out to shareholders either (i) as a special dividend or (ii) through open-market repurchase. If there are 2,000,000 shares outstanding, what is the market value of equity after the transaction under choice (i) and choice (ii)? Explain