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1a. Samrefusestoretireuntilhisretirementaccounthasabalanceofatleast$1million.The accountcurrentlyhasabalanceof$500,000,andearnsarateof 9%,compoundedmonthly. IfSamdoesnotplantomakeanymoredepositsintohisaccount,howlongwillhehaveto waituntilheretires? b. Acertaincompanyscashflowsareexpectedtogrowatarateof15%forthenexteight yearsbeforetaperingofftoaconstantgrowthrateof6%forever.Thecurrentyearscash flowis$50,000 (already paid).Ifthefirmscostofcapitalis20%,whatshoulditsfairmarketvaluebe? Roundyouranswertothenearestdollar.
1a. Samrefusestoretireuntilhisretirementaccounthasabalanceofatleast$1million.The accountcurrentlyhasabalanceof$500,000,andearnsarateof 9%,compoundedmonthly. IfSamdoesnotplantomakeanymoredepositsintohisaccount,howlongwillhehaveto waituntilheretires?
b.
Acertaincompanyscashflowsareexpectedtogrowatarateof15%forthenexteight yearsbeforetaperingofftoaconstantgrowthrateof6%forever.Thecurrentyearscash flowis$50,000 (already paid).Ifthefirmscostofcapitalis20%,whatshoulditsfairmarketvaluebe? Roundyouranswertothenearestdollar.
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