Assume Mr. Moore operates the "Reengineered Business" until the end of your budget period (2015). At that time he would sell the business for its book value (Owner Equity). It is estimated that the Owners Equity would grow to at least $1,825,684. Mr. Moore would use this amount to buy an investment that would pay him 6% per year (paid annually in one payment). At the end of 2015 Mr. Moore will be eligible for Social Security payment of $14,500 per year at that time.

It was suggested that he plan to live until he is 100 to make sure his money lasts, thus the money would be invested for 40 years. Mr. Moore said he'd consider retiring if the investment and Social Security produced a total of $150,000 per year for his retirement.

1.Mr. Moore is considering selling the business at the end of 2015 for his Owners Equity (projected to be at least $1,825,684) and using that amount to buy an investment that would pay him 6% per year (paid annually in one payment) for 40 years. What would the annual payment from such an investment be?

1.Will the combination of investment return and Social Security payments described in the text of the case meet Mr. Moore's minimum retirement goals?

1)No, it will fall short of his goal by approximately $14,160

2)Yes, it exceeds his goal by approximately $14,160

3)Yes. It exceeds his goal by well over $40,000.

4)Not enough information to tell.

2.When he was 30 years old, about the time he took over the restaurant from his father, Mr. Moore bought an unusual insurance policy: it was in the form of a "zero coupon" bond. The bond paid 5% per year and guaranteed him $475,000 when it matured in 50 years. He paid a single premium amount and no further payments were necessary. What did Mr. Moore pay for the policy when he bought it? Hint: This is a problem in PV (present value).

3.Mr. More wants to get into the catering business, specifically by using his family's secret sauce recipe which can be used on any meat product (i.e. hamburgers, hotdogs, chicken, etc.). To transport food, he bought a small SUV as a delivery truck for $75,000. He financed it for 2 years at 12% and will make equal payments each month for the 6 years. What will the monthly payments be?

4.About the SUV that Mr. Moore was thinking of buying for $75,000.00 and financing at 12% for 2 years: When the vehicle is paid off, how much will have been paid for the truck?