Question 7:

Assume that you are presently 30 years old and that you intend to retire when you turn 65. You would like to make sure that you have enough funds at the point of retirement to last until you are 95. You estimate that it would take $50,000 per year, in todays dollars to maintain a lifestyle that you desire.

Assume inflation is 2.8% and that you can get an 8% return on your long term investments until you retire. You also estimate that you should be able to get a 6% return on your investment after you retire.

How much should you be setting aside annually between now and your retirement to meet your goals?

What happens if you decide to wait an additional 15 years before starting to save for retirement? How much would you then have to set aside?

You suddenly got ill and had to retire unexpectedly at 55? If you maintained a standard of living of $50,000 per year, in todays dollars, what age would you be when your money ran out?

Question 8: Net Present Value

What does the Net Present Value evaluate? How should the dollar amount that the net present value generates in its calculations be interpreted?

Calculate the Net Present Value for the project that requires an investment of $91,347, has the estimated returns given in the following table, and must meet a minimum acceptable rate of return of 15%:

Year	1	2	3	4	5
Cash Flow	$23,456	$24,567	$26,435	$27,412	$28,490

Question 9: Internal Rate of Return

What does the Internal Rate of Return evaluate? How should the percentage value that the IRR calculation provides be interpreted?

Calculate the IRR for the project that has a $86,347 investment and the following returns. Should this project be undertaken if the MARR is 16%?

Year	1	2	3	4
Cash Flows	$34,762	$27,893	$20,674	$43,568

Calculate the IRR for the following cash flow stream:

	0	1	2	3	4	5
Cash Flows	-$12,000	$56,000	$12,000	-$180,000	$24,000	$120,000