1)Flag question If today is Year 0, what is the future value of the following cash flows 9 years from now? Assume an interest rate of 6

1)

Future Value (FV)= Present Value (PV) x (1+i)^t

i = Interest rate; t = time period

We have assumed that cash flows occur during the mid of the year. Hence, time remaining after year 1 cash flow = 7.5 years

Similarly, time remaining after year 2 cash flow = 6.5 years

Time remaining after year 3 cash flow = 5.5 years

FV of Cashflow in year 1 = 8,500 x (1+6.6%)^7.5 = $13,727.71

FV of Cashflow in year 2 = 9,300 x (1+6.6%)^7 = $14,089.80

FV of Cashflow in year 3 = 7,100 x (1+6.6%)^6 = $10,090.74

Total Future Value = $13,727.71 + $14,089.80 + $10,090.74 = $37,908.24. Hence, correct option is Option C

Another assumption is cash flows occur during the end of the year. Hence, time remaining after year 1 cash flow = 8 years

Similarly, time remaining after year 2 cash flow = 7 years

Time remaining after year 3 cash flow = 6 years

FV of Cashflow in year 1 = 8,500 x (1+6.6%)^8 = $14,173.48

FV of Cashflow in year 2 = 9,300 x (1+6.6%)^7 = $14,547.33

FV of Cashflow in year 3 = 7,100 x (1+6.6%)^6 = $10,418.41

Total Future Value = $14,173.48 + $14,547.33 + $10,418.41 = $39,139.23

2)

Preferred stock shares most of the characteristics that equity has and is commonly known as equity. The value of preferred stock to a company is effectively the price it pays in return for the income it gets from issuing and selling the stock. In other words, it’s the amount of money the company pays out in a year, divided by the lump sum they got from issuing the stock.

Value of preferred stock (Rp):

Rp = (Annual Dividend/Rate of Return) * 100

Value of preferred stock is = (70/0.12) * 100

                                          = 583.333333333*100

                                          = 583.33%