Question
An engineer is thinking of starting a part-time consulting business next September 5,on his 40th birthday. He expects the business will require an initial cash
An engineer is thinking of starting a part-time consulting business next September 5,on his 40th birthday. He expects the business will require an initial cash outlay of $5000, to come from his savings, and will cost $500 per year to operate; the business ought to generate $2000 per year in cash receipts. During the 20 years that he expects to operate the business, he plans to deposit the annual net proceeds in a bank each year, at an interest rateof8% per year, compounded annually. When he retires, on his 60th birthday, the engineer expects to invest whatever proceeds plus interest he then has from the business in a long-term savings plan that pays 10% per year, compounded annually. What is the maximum amount he could withdraw from the savings plan each year during his retirement and still have the funds last 15 years. Draw the cash flow diagram as well
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