Question
1a). Dixon Shuttleworth has been offered the choice of three retirement-planning investments. The first investment offers a 5 percent return for the first 5 years,
1a). Dixon Shuttleworth has been offered the choice of three retirement-planning investments. The first investment offers a 5 percent return for the first 5 years, a 10 percent return for the next 5 years, and a 20 percent return thereafter. The second investment offers 10 percent for the first 10 years and 15 percent thereafter. The third investment offers a constant 12 percent rate of return. Determine, for each of the given number of years, which of these investments is the best for Dixon if he plans to make one payment today into one of these funds and plans to retire in the following number of years.
1b). Gina Coulson has just contracted to sell a small parcel of land that she inherited a few years ago. The buyer is willing to pay $24,000 at closing of the transaction or will pay the amounts shown in the following table at the beginning of each of the next five years. Because Gina doesnt really need the money today, she plans to let it accumulate in an account that earns 7 percent annual interest. Given her desire to buy a house at the end of five years after closing on the sale of the lot, she decides to choose the payment alternative$24,000 lump sum or mixed stream of payments in the following tablethat provides the highest future value at the end of five years.
Mixed Stream
Beginning of Year (t) Cash Flow (CFt)
1 $ 2,000
2 4,000
3 6,000
4 8,000
5 10,000
1c). Landon Lowman, star quarterback of the university football team, has been approached about forgoing his last two years of eligibility and making himself available for the professional football draft. Talent scouts estimate that Landon could receive a signing bonus of $1 million today along with a 5-year contract for $3 million per year (payable at the end of the year). They further estimate that he could negotiate a contract for $5 million per year for the remaining seven years of his career. The scouts believe, however, that Landon will be a much higher draft pick if he improves by playing out his eligibility. If he stays at the university, he is expected to receive a $2 million signing bonus in two years along with a 5-year contract for $5 million per year. After that, the scouts expect Landon to obtain a 5-year contract for $6 million per year to take him into retirement. Assume that Landon can earn a 10 percent return over this time. Should Landon stay or go?
1d). Foster Industries has a project that has the following cash flows:
Year Cash Flow
0 -$300.00
1 100.00
2 125.43
3 90.12
4 ?
What cash flow will the project have to generate in the fourth year in order for the project to have a 15 percent rate of return?
1e). You just graduated, and you plan to work for 10 years and then to leave for the Australian "Outback" bush country. You figure you can save $1,000 a year for the first 5 years and $2,000 a year for the next 5 years. These savings cash flows will start one year from now. In addition, your family has just given you a $5,000 graduation gift. If you put the gift now, and your future savings when they start, into an account that pays 8 percent compounded annually, what will your financial "stake" be when you leave for Australia 10 years from now?
Please show me how I would calculate each of these using a financial calculator including how to access each function or if not applicable, the formula required. Thank you as I am very confused so please provide step by step!
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