Q3: Determining amount of investment capital _(60 points) Use the format in slide 11-8 of Chapter 11's PPT. Dave is the manager in a local hotel. He is planning for an early retirement at the age of 55. His financial advisor informs him that in order to accomplish his plan of early retirement and remain financially stable for the rest of his life, he needs a million dollar in his pension account when he retires 30 years from today. (a) If Dave wants to achieve this financial goal using all his savings as lump-sum (and no further investment), how much is the required lump-sum? Pension account's average annual return on investments is 7%. (6) Dave plans to make an initial investment of 25,000 for which the pension fund assures 7% average annual return. But, the pension fund offers only 6% average annual return for series of annual investments. What is the required annual investment? DETERMINING AMOUNT OF INVESTMENT CAPITAL cial goal. To accumulate $60,000 in 18 years for the purpose of meeting the cost of daughter's college education 1. Targeted Financial Goal (see Note 1) $ 60,000 2. Projected Average Return on Investments 9.0% A. Finding a Lump-Sum Investment: 3. Future Value Factor, from Appendix A based on - years to target date and a projected average return on investment of 4. Required Lump-Sum Investment (See Note 3) line 1 - line 3 B. Making a Series of Investments over Time 5. Amount of Initial Investment, if any (see Note 2) $ 7,500 ?. Future Value Factor, from Appendix A based on 18 years of target date and a projected average return on investment of 9% 4.72 7.Terminal Value of Initial Investment (See Note 3) line 5 X line ? $ 35,400 8. Balance to come from Savings Plan line 1 line 7 $ 27,600 9. Future Value Annuity Factor, from Appendix B based on 18 years to target date and a projected average return on investment of 9% 41.3 10. Series of Annual Investments Required over Time (See Note 3) line 8 = line 9 $ 596 Q3: Determining amount of investment capital _(60 points) Use the format in slide 11-8 of Chapter 11's PPT. Dave is the manager in a local hotel. He is planning for an early retirement at the age of 55. His financial advisor informs him that in order to accomplish his plan of early retirement and remain financially stable for the rest of his life, he needs a million dollar in his pension account when he retires 30 years from today. (a) If Dave wants to achieve this financial goal using all his savings as lump-sum (and no further investment), how much is the required lump-sum? Pension account's average annual return on investments is 7%. (6) Dave plans to make an initial investment of 25,000 for which the pension fund assures 7% average annual return. But, the pension fund offers only 6% average annual return for series of annual investments. What is the required annual investment? DETERMINING AMOUNT OF INVESTMENT CAPITAL cial goal. To accumulate $60,000 in 18 years for the purpose of meeting the cost of daughter's college education 1. Targeted Financial Goal (see Note 1) $ 60,000 2. Projected Average Return on Investments 9.0% A. Finding a Lump-Sum Investment: 3. Future Value Factor, from Appendix A based on - years to target date and a projected average return on investment of 4. Required Lump-Sum Investment (See Note 3) line 1 - line 3 B. Making a Series of Investments over Time 5. Amount of Initial Investment, if any (see Note 2) $ 7,500 ?. Future Value Factor, from Appendix A based on 18 years of target date and a projected average return on investment of 9% 4.72 7.Terminal Value of Initial Investment (See Note 3) line 5 X line ? $ 35,400 8. Balance to come from Savings Plan line 1 line 7 $ 27,600 9. Future Value Annuity Factor, from Appendix B based on 18 years to target date and a projected average return on investment of 9% 41.3 10. Series of Annual Investments Required over Time (See Note 3) line 8 = line 9 $ 596
