Question
15. Lola owns a(n) ice cream parlor that is worth 398,385 dollars and is expected to make annual cash flows forever. The cost of capital
15. Lola owns a(n) ice cream parlor that is worth 398,385 dollars and is expected to make annual cash flows forever. The cost of capital for the ice cream parlor is 14.97 percent. The next annual cash flow is expected in one year from today and all subsequent cash flows are expected to grow annually by 4.94 percent. What is the cash flow produced by the ice cream parlor in 4 years from today expected to be?
14. You own two investments, A and B, that have a combined total value of 63,418 dollars. Investment A is expected to make its next payment in 1 month. As next payment is expected to be 266 dollars and subsequent payments are expected to grow by 0.78 percent per month forever. The expected return for investment A is 1.25 percent per month. Investment B is expected to pay 219 dollars each quarter forever and the next payment is expected in 3 months. What is the quarterly expected return for investment B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.
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