Time Value of Money $4$

$1.$ Mark Weinstein has been working on an advanced technology in laser eye surgery. His technology will be available in the near term. He anticipates his first annual cash flow from the technology to be $$225,000,$ received two years from today. Subsequent annual cash flows will grow at $3\mathrm{.}2$ percent in perpetuity. What is the present value of the technology if the discount rate is $10\mathrm{.}1$ percent?

$2.$ Southern California Publishing Company is trying to decide whether to revise its popular textbook Financial Psychoanalysis Made Simple. The company has estimated that the revision will cost $$325,000.$ Cash flows from increased sales will be $$94,000$ the first year. These cash flows will increase by $4$ percent per year. The book will go out of print five years from now. Assume that the initial cost is paid now and revenues are received at the end of each year. If the company requires a return of $10$ percent for such an investment, should it undertake the revision?

$3.$ Today, December $31,$ you just received your salary of $$48,000$ and you plan to spend all of it$.$ However, you want to start saving for retirement beginning next quarter. You have decided that one quarter from today you will begin depositing $2\mathrm{.}25$ percent of your annual salary in an account that will earn $10$ percent compounded quarterly. Your salary will increase at $0875$ percent per quarter throughout your career. How much money will you have on the date of your retirement $40$ years from today