(a) What rate, when continuously compounded, will yield a 14% annual rate? (b) What is the effective annual rate when the 14% rate is continuously compounded? (c) Consider a cash flow of $10 every period in perpetuity starting one period from now (period t=0). What would be its price under continuous compounding of a 10% annual rate?

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4. You have been asked by your boss to evaluate three mutually exclusive projects. The cash flow estimates and costs of each project are given below 1 4 5 6 T-0 Project -3790 200 600 300 1000 2800 3790 1000 1000 1000 1000 1000 Project 5400 Project 3790 0 (all numbers are in thousands of dollars) As precisely as you can, describe how the most preferred project is related to the cost of capital