Portfolio managers are frequently paid a proportion of the funds under management. Suppose you manage a $107 million equity portfolio offering an end-of-year dividend yield (DIV₁/P₀ ) of 5.7%. Dividends and portfolio value are expected to grow at a constant rate. Your annual fee for managing this portfolio is 0.57% of portfolio value and is calculated at the end of each year.

a.	Assuming that you will continue to manage the portfolio from now to eternity, what is the present value of the management contract? (Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal place.)

Present value

$ milllion

b.	What would the contract value be, if you invested in stocks with a 4.7% yield? (Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)

Contract value

$ milllion