Bob just celebrated his 40^th birthday and his salary next year will be $300,000. Bob expects his salary to increase by 3% a year until his retirement at age 70.

a. If the discount rate is 5%, what is the PV of Bobs future salary payments?

b. For retirement planning, starting from next year Bob will put aside a constant amount from his salary each year and invest it at a return of 5% per annum. In order to have $5 million when he retires at age 70, how much will Bob need to save each year?

c. Assuming that Bob will live for 20 years post retirement, what would be his annual expenditure over those years if he intends to spend the same amount each year?