1. Daventport inc. offers a new employee a lump-sum signing bonus at the date of employment. Alternatively, the employee can take 30000 at the date of employment and another 50000 two years later. Assuming the employee’s time value of money is 8% annually, what lump sum at employment date would make her indifferent between the two options?
2. Kunkle company wishes to earn 20% annually on its investments. if it makes an investment that equals or exceeds the rate, it considers it a success. Assume that it invests 2 million and gets 500000 in return at the end of each year of x years. What is the minimum value of x for which it will consider the investment a success? Assume that it can’t invest for fractional parts of a year?
a. 4 years
b. 6 years
d. 9 years