Question
Requirement-A. A firm has an initial endowment of $84,357. The firm has identified three non-divisible feasible projects: Project-M requires $26,921 investment now to generate $30,734
Requirement-A. A firm has an initial endowment of $84,357. The firm has identified three non-divisible feasible projects: Project-M requires $26,921 investment now to generate $30,734 next year; Project-N requires $20,388 investment now to generate $33,390 next year; and Project-P requires $46,850 investment now to generate $57,613 next year. The firm invests in projects reasonably to maximise wealth. The average expected rate of return from the market is 17%. If Rob owns 52% shares of the firm, how much dividend would be expected by Rob in the next period based on the Two-Period Perfect Certainty model? <1 mark>
Requirement-B. A loan amount of $29,569 will be due after 7 years. Cob has a deposit plan to deposit $6,037 at the end of each year for the next 7 years. If the deposit generates 11% interest compounded monthly, find the deficit or surplus amount from this deposit plan to repay the total loan amount after 7 years. <1 mark>
Requirement-C. Bob will be starting a 5-year apprenticeship program in 19 months time. His mother, Liz, has promised him a living allowance of $234.7 per month to help support him during this time. If the interest rate is 10.0 percent per annum, compounding monthly, how much money will Liz need to set aside today to finance Bobs allowance? <1 mark>
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