1. Jill Moran will retire in 12 years. Upon retirement, she wants to be able to withdraw annual end of year payments of $42,000 for exactly 20 years. During the 12 year period leading up to retirement, she will fund the annuity by making equal annual end of year deposits into an account earning 9% interest. The fund will earn 10% after the initial 12 year period, during Jills retirement. The fund will equal zero at the end of the 20 year retirement period. All payments will be made or withdrawn at the end of each year. Use a time line to help answer the questions below.

a. What is the dollar sum needed at Jills retirement in 12 years to fund 20 annual payments of $42,500?

b. What is the equal annual deposit needed for each of the next 12 years for Jill to fund the retirement annuity?

2. Benson Designs has prepared the following estimates for a long-term project it is considering. The initial investment is $18,250 and the project is expected to deliver aftertax cash inflows of $4000 per year for 7 years. The cost of capital is 8%.

a. Determine the net present value of the project.

b. Determine the internal rate of return.

c. Would you accept the project?