1. You wish to retire with $5 Million in 38 years. You estimate you will earn 8% annually on your investments. How much must you invest each year in order to reach your goal?
a) Ordinary (1st payment made at the end of the year)
b) Due (1st payment made today)
2. You would like to withdraw $80,000 per year during retirement. You expect to live 20 years after you retire at age 65. How much do you need to have saved by the time you retire if you can earn 4% on your funds?
3. As part of an agreement for investing in a start-up company, you will receive $10,000 at the end of each year for the next 3 years. If the agreed upon interest rate is 15%, what is the amount of money you are required to invest.
4. a) From the sale of your family property, you will receive $25,000 today and again each year for the next 15 years. If the discount rate is 7%, compute the present value of your future payments.
b) Instead of receiving annual payments, you could receive $200,000 lump sum. Should you take the lump sum instead?
5. You plan to purchase a small service company. You anticipate receiving annual cash flows of $60,000 per year indefinitely.
a) If you require an 8% return on your investment, what is the most you should pay for this company?
b) What is the NPV if you can purchase it for $500,000?