Jack needs to spend $100000 in mid August, hence the amount he can consume today will be the amount present value of amount available with Jack in 2017 less $100000.= $1,08,198.16 - $100,000= $8,198.16QUESTION 1 continued.b)This question relates to the valuation of shares.Big Ideas Ltd has just paid a dividend of $1.20 a share. Investors require a 12% per annum return on investments such as Big Ideas. What would a share in Big Ideas Ltd be expected to sell for today (August, 2017) if the dividend is expected to increase by 20% in August, 2018, 15% in August, 2019, 10% in August, 2020 and thereafter by 5 per cent a year forever, from August, 2021 onwards? Answer:YearDividend growth rateExpected dividend2017$1.2201820%$1.44201915%$1.65202010%$1.8220215%$1.91Price of share in year 2020 = expected dividend / (rate of return – growth rate)= 1.91 / (0.12-0.05)= $27.32Price of share in 2017 = D1 / (1+r)^1 + D2 / (1+r)^2 + D3 / (1+r)^3 + P4 / (1+r)^4= 1.44/ 1.12^1 + 1.65/ 1.12^2 + 1.82/ 1.12^3 + 27.32/ 1.12^3= $1.28 + $1.31 + $1.29+ $19.44= $23.32Question 2a)This question relates to the time value of money and deferred perpetuities.Colin Greenway attended Bunyip High School in the 1970s. After leaving school, Colin became a successful entrepreneur and is now very wealthy. He wishes to establish a perpetual scholarship fund which will provide $10,000 a year, payable to

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