Practice Corporate Finance

 

 

 

 

In 2013 Bill Gates had a private wealth of about $28 billion after he reduced his stake in Microsoft from 21% to around 14% by moving billions into his charitable foundation. Let’s see what Bill Gates can do with his money in the following problems.

a. I’ll take Manhattan? Manhattan’s native tribe sold Manhattan Island to Peter Minuit for $24 in 1626. Now, 387 years later in 2013, Bill Gates wants to buy the island from the “current natives.” How much would Bill have to pay for Manhattan if the “current natives” want a 6% annual return on the original $24 purchase price? Could he afford it? (5 points)

b. How much would Bill have to pay for Manhattan if the “current natives” want a 6% return compounded monthly on the original $24 purchase price? (5 points)

c. Microsoft Seattle? Bill Gates decides to pass on Manhattan and instead plans to buy the city of Seattle, Washington, for $60 billion in 10 years. How much would Mr. Gates have to invest today at 10 percent compounded annually in order to purchase Seattle in 10 years? (5 points)

d. If Bill Gates decides to support his foundation with further funding of $1 billion that he will contribute to the saving account at the end of each year during the next 20 years and the bank offers him a return of 8%, how much will be generated on this saving account after 20 years? (10 points)

 

Sample Solution

Firstly, Vittola discusses one of the just causes of war, most importantly, is when harm is inflicted but he does mention the harm does not lead to war, it depends on the extent or proportionality, another condition to jus ad bellum (Begby et al (2006b), Page 314). Frowe, however, argues the idea of “just cause” based on “Sovereignty” which refers to the protection of political and territorial rights, along with human rights. In contemporary view, this view is more complicated to answer, given the rise of globalisation. Similarly, it is difficult to measure proportionality, particularly in war, because not only that there is an epistemic problem in calculating, but again today’s world has developed (Frowe (2011), Page 54-6).
Furthermore, Vittola argues war is necessary, not only for defensive purposes, ‘since it is lawful to resist force with force,’ but also to fight against the unjust, an offensive war, nations which are not punished for acting unjustly towards its own people or have unjustly taken land from the home nation (Begby et al (2006b), Page 310&313); to “teach its enemies a lesson,” but mainly to achieve the aim of war. This validates Aristotle’s argument: ‘there must be war for the sake of peace (Aristotle (1996), Page 187). However, Frowe argues “self-defence” has a plurality of descriptions, seen in Chapter 1, showing that self-defence cannot always justify one’s actions. Even more problematic, is the case of self-defence in war, where two conflicting views are established: The Collectivists, a whole new theory and the Individualists, the continuation of the domestic theory of self-defence (Frowe (2011), Page 9& 29-34). More importantly, Frowe refutes Vittola’s view on vengeance because firstly it empowers the punisher’s authority, but also today’s world prevents this action between countries through legal bodies like the UN, since we have modernised into a relatively peaceful society (Frowe (2011), Page 80-1). Most importantly, Frowe further refutes Vittola through his claim that ‘right intention cannot be used as an excuse to wage war in response to anticipated wrong,’ suggesting we cannot just harm another just because they have done something unjust. Other factors need to be considered

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