1) Your employer has decided to place year-end deposits of= $1,000, $2,000 and $3,000 into your retirement account. $1,000 deposit will be 1 year from today, $2,000 deposit 2 years from today, and $3,000 deposit 3 years from today. If your account earns 5% per year, how much money will you have in account at the ending of year three when last deposit is made?
2) Owner of Grandma's Applesauce is setting up to retire after coming year. She has to repay a loan= $50,000 plus 8% interest and should rely on cash flow from operations to do so. Cash flow from operations is uncertain; there is a 70% probability it will equal $65,000, and 30% probability it will equal $45,000. Suppose a tax rate of= 0%, compute owner's expected cash flow after debt service?
3) Simpkins Corporation doesn’t pay any dividends as it is expanding quickly and needs to retain all of it’s earnings. Though, investors expect Simpkins to begin paying and dividends, with 1st dividend of $.50 coming three years from today. Dividend must grow rapidly – at a rate of 80% per year – in years 4 and 5. After year five, company must increase at a constant rate of 7% per year. If required return on stock is 16%, determine the value of stock today? Assume the market is in equilibrium with required return equal to the expected return.