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(a) Assume that you have been offered a special set of annuities by your insurance company, whereby you will receive sh. 20,000 a year for
(a) Assume that you have been offered a special set of annuities by your insurance company, whereby you will receive sh. 20,000 a year for the next 10 years and sh. 10,000 a year for the following 10 years. Required: How much would you be willing to pay for the these annuities, if your discount rate is 10 percent and the annuities are paid at the end of each year (10 Marks) b) Savvy Solutions is a software company. Over the last two decades, the company has not been paying dividends. However, the company expects to pay sh. 2.75 dividends per share at the end of the current year. Thereafter, Earnings and Dividends are expected to grow at a constant rate of 4 percent per year into the foreseeable future. Required: If common stockholders require a minimum return of 8 percent; How much is the stock of Savvy Solutions worth today (6 Marks) c) Compare and contrast the goals of shareholder wealth maximization and profit maximization (9 marks)
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