Coporate Finance

BUSS207 Financial Management Spring, 2013 Assignment 1 (Due by April 4, 2013)

Please solve the following questions. If you prefer to work in a group in completing this assignment, you may do so. Groups are limited to a maximum size of 3 students. If you work in a group, the group will turn in one solution to the assignment and everyone in the group will receive the same grade on the assignment. If you work in a group, please make sure that you write down the names of all of your group members. If more than one group works together and turns in, substantially, the same work, this violates the rules of the course and the rules on academic integrity, and penalties will be assessed. The assignment is due at the beginning of class on the due date. Please show all the intermediate steps and calculations when solving the problems and state your assumptions (if any). Please type your answers.

1. You and your spouse just had a baby. Ecstatic with the outstanding education you received at Korea University, you want to send baby to college in 18 years and be able to pay for the baby's college education. You need to estimate cost of each year of college (you're only paying for the 4 years necessary to complete a bachelor's degree) for when your baby starts college 18 years from today. Also, you want to estimate how much you need to save in order to be able to pay these future college costs. Here are some assumptions to help you with your analysis.     You want your baby to enjoy the same quality education at the Korea University that you received. The current annual cost estimate to cover all student expenses at the Korea University today is $22,000. You anticipate that college costs will continue to rise at the recent college cost inflation rate of 5 percent annually. Your baby will need annual college money at the beginning of each year. This means 4 withdrawals from baby's college fund at the beginning of her freshman year (18 years from today), sophomore year,...