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Let’s explore retirement planning analysis by calculating the data and sketching a graph that shows the relationship between interest rate and length of the annuity, i.e. the period that monthly withdrawals are made from the retirement account.
Let’s assume that Joe has $500,000 in his retirement account on his 65th birthday. Assume that his first withdrawal is made one month after his 65th birthday.
a. Determine the maximum monthly withdrawal that can be made from the account for each combination of interest rate and annuity length listed below:
1) Interest rates of 3%, 6% and 9% per year, each compounded monthly.
2) Annuity terminating at ages 70, 75, 80 and 85.
What is the current price of these bonds? If the interest rates rise by 2%, what is the percentage price change of these bonds? If the interest rates fall by 2%, what is the percentage price change of these bonds?
Basil Herb Co. is expected to pay $2.20 per share in dividends at the end of the next 12 months. The growth rate in dividends is expected to be constant at 6% per year. If the stock is selling for $55 per share, what is the required rate of return?
The expected rate of return on the shares is 12%. Calculate the opportunity cost of capital for an average-risk Whispering Pines investment. Next, suppose the company issue debt, repurchases shares, and moves to a 30% debt to value ratio (D/V=.30). C..
CAPM is one of the more popular models for determining the risk premium on a stock. If the Expected Return on the Market Portfolio is 9.10%, the Risk-Free Rate is 2.0%, and the Beta for Stock i is 0.9. Find the Expected Return on the Stock using the ..
In a recent WSJ article you read that Hulu has stepped up their competition with Netflix by making the decision to invest millions in new movies and TV shows. Do you think this would be an example of an easy or difficult capital budgeting decision? W..
The strategic positioning of your chosen organisation is a central issue for its senior managers. As you know from your readings, strategic positioning has two important themes: strategic potential and organisational ambitions (page 46 of your text -..
You are a small employer who has believed in providing top-notch benefits to your 250 employees for many years. For the last several years you have provided a wide choice of health benefits through a cafeteria plan and made very generous contribution..
Story brook, Inc. is currently selling for $25.50, with trailing EPS and dividends of $2.25 and $1.31, respectively. The company’s P/E is 11.3, P/B is 7.1, and P/S is 4.3. The ROE is 21 percent, and the profit margin on sales is 8.25 percent. The Tre..
The average cost of a certain model car was $18,000 ten years ago. This year the average cost is $30,000. calculate the average monthly inflation rate fm for this model.
Total revenues and net income for 2011 for Lake Corporation is $3,500,000 and $280,000 respectively. Lake Corporation has had 400,000 common shares of stock outstanding for all of 2011. The selling price of smith lake corporation common stock on Dece..
When is it appropriate to use the firm's weighted average cost of capital (WACC) to evaluate a proposed investment and what would be the potential implications for Delta if WACC is used to evaluate the pet supply project?
Corporate income tax/ Meyer Inc has taxable income (earnings before taxes) of 300,000. Calcualte Meyer's federal income tax liability using the tax table . What are the firm's average and marginal taxes?
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