What is? today value of the? bequest

Assignment Help Financial Management

Reference no: EM131839765

1. A rich relative has bequeathed you a growing perpetuity. The first payment will occur in a year and will be $4,000. Each year after? that, you will receive a payment on the anniversary of the last payment that is nbsp 5% larger than the last payment. This pattern of payments will go on forever. Assume that the interest rate is 16% per year.

a. What is? today's value of the? bequest?

b. What is the value of the bequest immediately after the first payment is? made?

2. You work for a pharmaceutical company that has developed a new drug. The patent on the drug will last 17 years. You expect that the? drug's profits will be $3 million in its first year and that this amount will grow at a rate of 2% per year for the next 17 years. Once the patent? expires, other pharmaceutical companies will be able to produce the same drug and competition will likely drive profits to zero. What is the present value of the new drug if the interest rate is12% per? year? The present value of the new drug is ....$million. ?(Round to three decimal? places.)

Reference no: EM131839765

Questions Cloud

How much is the total contract worth : How much is the total contract worth at the end of the 35-year term at a 7% interest rate, compounded yearly?

Analyse the difficult conversation : Analyse the difficult conversation. Explain how well the characters involved applied effective principles for communicating.

Investment account-annual rate of return have you earned : You have an investment account that started with ?$ 1,000 10 years ago and which now has grown to ?$10,000. What annual rate of return have you earned?.

The amount of canadian dollars jacque borrowed : You’ll see if you take the interest rate differential and multiply that percentage profit by the amount of Canadian dollars Jacque borrowed.

What is? today value of the? bequest : A rich relative has bequeathed you a growing perpetuity. What is? today's value of the? bequest?

What is the annual effective cost of borrowing for loan : What is the annual effective cost of borrowing for this loan if you make your scheduled payments for the full 30 years?

How much would they have to save each year to reach goal : how much would they have to save each year to reach their new? goal?

What will be your monthly payment : If you need to borrow $7,700 to purchase your dream Harley-Davidson, what will be your monthly payment.

Profit diagrams for the options on the expiration : Draw the profit diagrams for the following options on the expiration date.

User Account

All Pages