1. Generally speaking, the cost of capital for a food-processing company is lower than the cost of capital for a company that runs casinos. Briefly explain why this is the case.
2. Mary Martinez is ready to retire and has a choice of three pension plans. Plan A provides for an immediate cash payment of $350,000. Plan B provides for the payment of $40,000 per year for 8 years and the payment of $200,000 at the end of year 8 . Plan C will pay $35,000 per year for 8 years. Mary Martinez desires a return of 8 percent. Determine the present value of each plan and select the best one. 3. Suppose you face the prospect of receiving $1,200 per year for the next 7 years plus an extra $950 payment at the end of 7 years. Determine how much this prospect is worth today if the required rate of return is 15 percent.