Question
1. If Dave and his employer contribute a total of $10,000 annually, how much will that amount accumulate to over the next 30 years,
1. If Dave and his employer contribute a total of $10,000 annually, how much will that amount accumulate to over the next 30 years, at which time Dave and Sharon hope to retire? Future Value of Annuity Contribution Years 30 Annual rate of return 7.00% Future value + 2. Assuming that Dave's marginal tax bracket is 25 percent, by how much should his federal taxes decline this year if he contributes $7,000 to his retirement account? 3. The Sampsons' tax bracket has not changed. Assuming that Dave contributes $7,000 to his retirement account and that his taxes are lower as a result, by how much are Dave's cash flows reduced over the coming year? (Refer to your answer in question 2 when solving this problem.) 4. If Dave contributes $7,000 to his retirement account, he will have less cash inflows as a result. How can the Sampsons afford to make this contribution? Suggest some ways that they may be able to offset the reduction in cash inflows.
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