A wealthy private investor had been approached by Union Finance Company on the previous day. It seemed that Union Finance was interested in loaning money to one of its larger clients, but the client's demands were such that Union could not manage the whole thing. Specifically, the client wanted to obtain a loan for $385,000, offering to repay Union Finance $100,000 per year over seven years. Union Finance made the private investor the following proposition. Since it was bringing private investor business, its directors argued, they felt that it was only fair for private investor to put up a proportionately larger share of the money. If investor would put up 60% of the money ($231,000), then Union would put up the remaining 40% ($154,000). They would split the payments evenly, each getting $50,000 at the end of each year for the next seven years. Questions 1. Union Finance can usually earn 18% of its money. Using this interest rate, what is the net present value of the client's offer to Union? 2. The private investor does not have access to the same investments as the Union. In fact, the best available alternative is to invest in a security earning 10% over the next seven years. Using this interest rate, what is the private investor's net present value of the offer made by the Union? Should the private investor accept the offer? 3. What is the net present value of the deal to the Union if the private investor participates as proposed? 4. Suppose they split the $385,000 in half and Union receives $100,000 for the first 3 years and Briggs receives $100,000 per year for years 4-7. Which of these two investors is more patient? Which of these two investors is more profitable?