D. Retirement Revisited (Questions 24 and 25)

Assume Mr. Moore operates the Reengineered Business until the end of your budget period (2019). 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 2019 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 hed 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 2019 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. Moores 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.