Using the information below, how would you create capital budgeting calculations for both options? How would you make retirement forecast for each project?

Married couple- $250,000 per year income from W-2 form.

Ages 45 and 42, no children.

In addition to the W-2 income they own a business (S-Corporation) and typically see about $100,000 in dividends each year (total between the two of them).

Current retirement savings = $1,500,000.

They contribute the maximum possible to a Simple IRA each year.

They would like to retire at 50 with $2,500,000 in their retirement account.

They will also be continuing ownership in the S-corp and plan to continue to receive the dividends after retirement.

They are looking at the following options from a capital budget perspective (NOTE: they can only choose one):

Purchase a rental property for $500,000. It will create cash flow of $60,000 per year in rent, which will increase by 4% per year over the next 10 years. They then anticipate being able to sell the property for $750,000.

Invest $500,000 in a 10 year 10% coupon bond, paying out dividends semi-annually.