a. Dr. Fatima has been working on an advanced technology in laser eye surgery. The technology is expected to be available to the medical industry six years from today and will generate annual income of $600,000 six years from now and it will grow at 4 percent perpetually starting that year. What is the present value of the technology if interest rate is 12 percent?

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b. You are saving for the college education of your three children. They are two years apart in age; one will begin college in 6 years, another at year 8 and another at year 10. You estimate your children’s college expenses to be $30,000 per year per child, paid at the beginning of each college year (first payment for first child is at year 6 and so on). The annual interest rate is 5 percent. How much money must you deposit in an account each year to fund your children’s education? You will begin payments one year from today. You will make your last deposit when your oldest child enters college. Also assume that each child will take 4 years to graduate from college.

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a Present Value of Dr Fatimas Technology 1 Formula We can use the perpetuity formula with a growth r... View the full answer