Suppose that Ackmans plan works and you have exactly $1 million available on the day you retire. In retirement, you will invest more conservatively and expect to have a lower annual rate of return of 3.0% (use this rate for the questions below).

1. How much will you be able to withdraw at the end of each year in retirement if you expect to make your last withdrawal at age 80 (i.e., 15 withdrawals in total)?

2. Suppose that instead you would like to withdraw $120,000 at the end of each year in retirement. How long will your retirement savings of $1 million last you?

3. Analysts expect Walmart to have earnings per share of $5.60 for the coming year (year 1). Walmart intends to invest heavily in its online platform in the near term and therefore plans to retain and reinvest 60% of its earnings for the next three years (years 1, 2 and 3). For the next two years (years 4 and 5), retention and reinvestment is anticipated to decrease, with Walmart expected to retain 50% of its earnings. After that (year 6 onwards) the retention rate is expected to drop to 40% and remain that way. Walmarts new investments in online shopping are expected to generate a return of 15% per year. Walmarts equity cost of capital is estimated to be 8%.

1. Using the information provided above, estimate Walmarts share price today.
2. Suppose the retention rate estimate for year 6 onwards given above is not credible and you therefore ignore it (estimates prior to year 5 are still valid). Instead, you expect Walmarts 1-year forward price to earnings ratio in year 5 (i.e., PE ratio based on year 5 price and year 6 expected earnings) to be 24.5 (the midpoint between the S&P 500 historical average of 16 and Walmarts current PE ratio of 33).

   Use this information to come up with another estimate of Walmarts share price.

3. Suppose you purchase a bond recently issued by Costco Inc. on 01/2/2021. The bond matures on 01/2/2031 and has a coupon rate 2.140%. The coupons will be paid semi-annually.
4. You purchase the bond for $99.2010 (per $100 face value) on 01/2/2021. What is the bonds yield-to-maturity on this date?