Calculate time value of money, Accounting Basics

Mr. Horace, aged 25, has $25,000 cash to invest for his retirement. In addition, he plans to save and invest $8,000 per year (at the end of every year) for the next 40 years, at which time he will be 65 and retire. He plans to spend $55,000 per year (at the end of each year) after his retirement. He expects that he will live until age 90. The rate of interest is 6% per year.

a) How much money will he have at the end of 40 years?

b) Will he have enough money to support his retirement spending? Show your calculation. 

c) If he dies at the age of 85, will he have any money left for his estate? If yes, how much?

You are the owner of a used car business near the York campus. Your company borrows money from a bank on a line of credit with a monthly interest rate of 0.50%. You know that some of your customers may not have the best credit rating, so you have decided that you need to charge all customers a higher interest rate  (than your own bank rate) when they finance  their purchases. Your average sales price per used car is $6,500 when it is financed for 36 months at an 18% APR with monthly compounding. 

a) What is the dollar amount of a customer's monthly payment on your "average" car sale? Assume payments are made at the end of the month.

b) What is the dollar amount of a customer's monthly payment if payments are made at the beginning of each month and the customer pays $1,000 cash up front?

c) Would your profit be higher or lower if a customer made a cash purchase, paying the entire $6,500 immediately, instead of the 36 payments calculated in part a)? Explain why the profit is different, and compute the dollar amount of the change in profits.

Posted Date: 2/19/2013 4:30:41 AM | Location : United States







Related Discussions:- Calculate time value of money, Assignment Help, Ask Question on Calculate time value of money, Get Answer, Expert's Help, Calculate time value of money Discussions

Write discussion on Calculate time value of money
Your posts are moderated
Related Questions
Prepare a trial balance All account names would be listed in left-hand column. Place the account balance in appropriate debit or credit column for those accounts which have

Q. Define Current assets? Current assets are cash and other assets that a business is able to convert to cash or uses up in a relatively short period one year or one operating

Q. Illustrate Periodic inventory procedure? Companies by means of periodic inventory procedure make no entries to the Merchandise Inventory account nor do they maintain unit re

Q. Show Advantages and disadvantages of weighted-average? Advantages and disadvantages of weighted-average when a company utilizes the weighted average method and prices are ri

The book of Deven Verma could not be tallied. The account transferred the difference of Rs. 1.270 in the suspense account on the debit side. the following mistakes were found later

Q. Can you explain about Liabilities? Liabilities -- amounts owed by a company to others. Current liabilities are those amounts duewithin one year or less and generally include

Hi there, I was just wondering I''m not to sure how to describe my assignment, the subject is ACCOUNTING for university level... and it is 100 Level never don''t this paper in high

Q. Show Tax benefits of LIFO? Tax benefits of LIFO The LIFO method outcomes in the lowest taxable income and thus the lowest income taxes when prices are rising. The Internal R

Illustrate the structure of brain Brain is capable of changing its structure in numerous ways. Synapses become stronger and denser. Tiny blood vessels increase in size and numb

Q. Explain about Gross margin method? The steps in computing ending inventory under the gross margin method are - Estimate gross margin based on net sales using the similar