1. Marko, Inc. is considering the purchase of ABC Corporation. Marko believes that ABC can generate cash flows of $5,000, $9,000 and $15,000 over the next three years, respectively. After that time, Marko feels ABC will be worthless. Marko has determined that a 14% rate of return is applicable to this potential purchase. What is Marko willing to pay today to buy ABC Corporation?
2. Today you earn a salary of $28,500. What will be your annual salary fifteen years from now if you earn annual raises of 3.5%?
These multiple choice questions belong to Finance. The first and second questions deal with cash flows, net present value and internal rate of return. While in the first question, a company wants to purchase another company because of the earnings and the second question is about annually increasing salary after 15 years with 3.5%.
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