Q1. Southern Tours is considering acquiring Holiday Vacations. Management believes Holiday Vacations can generate cash flows of $218,000, $224,000, and $238,000 over the next three years, respectively. After that time, they feel the business will be worthless. If the desired rate of return is 14.5%, what is the maximum Southern Tours should pay today for Holiday Vacations?

A) 519,799.59

B) 538,615.08

C) 545,920.61

D) 595.170.53

E) 538,407.71

Q2. With an interest-only loan the principle is:

A) forgiven over the loan period; thus it does not have to be repaid

B) repaid in decreasing increments and included in each loan payment

C) repaid in one lump sum at the end of the loan period

D) repaid in equal annual payments

E) repaid in increasing increments through regular monthly payments