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This is a classic retirement problem. A time line will help in solving it. Your friend is celebrating her 40th birthday today and wants to start saving for her anticipated retirement at age 65. She wants to be able to withdraw $129,000 from her savings account on each birthday for 20 years following her retirement; the first withdrawal will be on her 66th birthday. Your friend intends to invest her money in the local credit union, which offers 7.4 percent interest per year. She wants to make equal annual payments on each birthday into the account established at the credit union for her retirement fund. a. If she starts making these deposits on her 41st birthday and continues to make deposits until she is 65 (the last deposit will be on her 65th birthday), what amount must she deposit annually to be able to make the desired withdrawals at retirement? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Annual deposit amount $ 19778.01 b. Suppose your friend has just inherited a large sum of money. Rather than making equal annual payments, she has decided to make one lump sum payment on her 40th birthday to cover her retirement needs. What amount does she have to deposit? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) Amount deposit $ 222412.07 c. Suppose your friend’s employer will contribute $3,900 to the account every year as part of the company’s profit-sharing plan. In addition, your friend expects a $179,000 distribution from a family trust fund on her 55th birthday, which she will also put into the retirement account. What amount must she deposit annually now to be able to make the desired withdrawals at retirement? I have already answered parts a and b.
Harrison Electronics, Inc. operates a chain of electrical lighting and fixture distribution centers throughout northern Arizona. The firm is anticipating expansion of its sales in the coming year as a result of recent population growth trends. What a..
Why is planning, such as cash flow and revenue planning, so important to businesses? What are the necessary items that businesses must think about when they develop their financial plans and forecasted financial statements?
How should intangible assets be disclosed on the balance sheet?
We buy a put option of Florenthal, Lesser and associates. Its premium is $4 and the strike price is $44. The current market price is $50. If the price drops to $35, shall we exercise the put option? If not, why not, and If yes, why yes? Compare the t..
Suppose your company imports computer motherboards from Singapore. The exchange rate is currently 1.2943 S$/US$. You have just placed an order for 24,000 motherboards at a cost to you of 239.00 Singapore dollars each. What is the break-even exchange ..
Professor’s Annuity Corp. offers a lifetime annuity to retiring professors. For a payment of $70,000 ("present value") at age 65, the firm will pay the retiring professor $350 a month until death. If the professor’s remaining life expectancy is 20 ..
1 the type of risk that can be diversified away is called .a unsystematic riskb systematic riskc nondiversifiable riskd
Company has an average collection period of 34 days and factors all of its receivables immediately at a 3.1 percent discount. Assume all accounts are collected in full. What is the firm's effective cost of borrowing? Identify which of the following w..
Assume you are presenting your budget and the business owner asks you about the projected growth in sales over the 5-year period. How would you defend the growth in sales for your particular company? What information would you use as support?
A bank buys 150 shares of a company on 1 January 2012 at a price of $156.30 per share. A dividend of $10 per share is paid on 1 January 2013. Calculate the time-weighted rate of return on bank’s portfolio.
What is the value of the common stock based on the market price of the bond?
Explain the theory behind the concept of "required return" on proposed capital investments.
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