A. You are running a hot Internet company. Analysts predict that its earnings will grow at 40% par year for the next five years. After that, as competition increases, earnings growth is expected to slow to 6% per year and continue at that level forever. Your company has just announced earnings of $2 million. What is the present value of all future earnings if the interest rate is 8%? (Assume all cash flows occur at the end of the year.)

B. You have just entered an MBA program and have decided to pay for the living expenses using a credit card that has no minimum monthly payment. You intend to charge $1, 000 per month on the card for the next 21 months. The card carries a monthly interest of 1%. How much money will you owe on the card 22 months from now when you receive your first statement post-graduation?