1. You plan on retiring in 30 years and believe it is time to start making annual contributions to a retirement account. (a) How much will you have in your retirement account if you deposit $2600 each year in a retirement fund that will pay you 7% per year? (b) How much will you have if that 7% interest is paid monthly?

3. Business Processing Consultants (BPC), Inc. is interested in replacing its fully depreciated in-house computer capability with a five-year contract to use computer support from Amazon World Services. To do so the company must pay a charge of $650,000 at the end of the first year and a subsequent annual fee for usage. Business Processing believes this improved capability will increase sales for the next five years. Their forecast projects net extra revenue each year (after subtracting Amazons annual fee) to be as follows.

End of First year +100,000 End of Second year +120,000 End of Third year +135,000 End of Fourth year + 225,000 End of Fifth year + 275,000

Determine the present value of this investment using an 7% discount rate.

4. Johnson motor products provides engines for commercial lawnmowers. Sales for the last six years are shown below.

Date Sales (1000s) Six years ago 36 Five years ago 39 Four years ago 40 Three years ago 39 Two years ago 42 Last year 43

The company has asked you to determine whether a more accurate forecast of this years can be made using a textbook nave method or a three-period moving average method. Provide the appropriate evidence.