a) Upon retirement a couple is considering the option of purchasing a perpetuity of $60000 from their retirement savings. You as a financial adviser should advise how much they should set aside from their retirement funds if you believe that the market risk is the same as the market portfolio. The T. Bill rate is 4% and the expected market risk premium is 7%

b)A chip manufacturer makes video gaming chip that can be sold for $50. The chip material cost is $15 for each chip. The operations costs of the chip manufacturer (administration etc.) is $100000. The chip manufacturing machinery costs $500000 that is depreciated over 10 years to a salvage value of zero. What is the NPV breakeven level of sales assuming a tax rate of 35%, 10-year project life and a discount rate of 12%.