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1. Your neighbor approaches you and offers to sell you some of his land. He...

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1. Your neighbor approaches you and offers to sell you some of his land. He says this land is currently leased out for another 4 years. If you buy the land, you can start using it after four years. You believe that the profit you can make on this land is $25,000 per year. The interest rate is 4%. How much would you be willing to bid for the land? 2. A stock pays $100 in dividends quarterly. Annual discount rate is 5%. If stock price can be modeled as present value of future stream of dividends, how much would this stock be worth? How would valuation change if we believed that after 100 years, a new technology will emerge and will make the company go bankrupt

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