SECTION B Answer ALL questions. Question 3 (a) Your aunt is choosing between two retirement plans offered to her. She is asking for your help to choose between the two plans. (b) Plan (1) She will receive a lump sum of $120,000 at the end of Year 6 (sixth year). Plan (2) She will receive $20,000 annually for six (6) years, where the first cash flow will begin one year from now. (i) If the interest rate is expected to remain constant at 10% per annum over the next ten years, calculate the present value of Plan (1) and Plan (2). respectively. (6 marks) (ii) Which plan will you advise your aunt to take up? Explain your answer. (2 marks) Jefferson's recently paid an annual dividend of $1.31 per share. The dividend is expected to decrease by 4% each year. What is the share price today if your required return is 16% ? (4 marks) (c) Calculate the present value of a $1,000 bond with a 10% coupon, annual payments, and 5 years to maturity with an interest rate of 12%. (3 marks) (d) Describe TWO (2) differences between ordinary shares and bonds. (2 marks) (e) Max Ltd has a supplier offering the credit term of 3/10 net 60 for an invoice of $400,000. (i) (ii) Calculate the cost of discount. If the bank interest rate is 20% per annum, advise if Supreme Ltd should take up the discount. Explain your answer. (5 marks) Given your answer in Part (i), when and how much should Supreme Ltd pay its supplier? (3 marks)