Solve various time value of money scenarios (Learning Objectives 3, 4)}

1. Jeff just hit the jackpot in Las Vegas and won \(\$ 25,000\) ! If he invests it now at a \(12 \%\) interest rate, how much will it be worth in 20 years?

2. Evan would like to have \(\$ 2,000,000\) saved by the time he retires in 40 years. How much does he need to invest now at a \(10 \%\) interest rate to fund his retirement goal?

3. Assume that Stephanie accumulates savings of \(\$ 1\) million by the time she retires. If she invests this savings at \(8 \%\), how much money will she be able to withdraw at the end of each year for 20 years?

4. Katelyn plans to invest \(\$ 2,000\) at the end of each year for the next seven years. Assuming a \(14 \%\) interest rate, what will her investment be worth seven years from now?

5. Assuming a \(6 \%\) interest rate, how much would Danielle have to invest now to be able to withdraw \(\$ 10,000\) at the end of each year for the next nine years?

6. Jim is considering a capital investment that costs \(\$ 485,000\) and will provide the following net cash inflows:

Using a hurdle rate of \(12 \%\), find the NPV of the investment.
7. What is the IRR of the capital investment described in Question 6?

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Year 2 123 Net Cash Inflow $300,000 200,000 100,000