Question
you are choosing between two mutually exclusive projects. The cash flows for the projects are given in the following table. Your decision rule requires payback
you are choosing between two mutually exclusive projects. The cash flows for the projects are
given in the following table.
Your decision rule requires payback in 3 years or less.
0 1 2 3 4
Project A: -100 25 30 40 50
Project B: -100 50 40 30 20
1. Which of the projects should you accept given the decision rule above?
A) Project A only
B) Project B only
C) Neither project
D) Both projects
You have just turned 22 years old, received your bachelor's degree and accepted your first job.
Now you must decide how much money to put into your retirement plan. You will
contribute the same amount to the plan at the end of every year you work. The money you
contribute will earn 7% per year, and cannot be withdrawn until you turn 65, after which
time you can make withdrawals as you see fit.
2. You expect to live to be 100 and decide that you will need $100,000 per year to live
comfortably in retirement. You plan to retire on your 65th birthday. You will make
your first withdrawal one year after retirement and annually thereafter. How much will
you need to have in your account when you retire?
A) $1,067,658
B) $1,294,767 C) $1,421,277
D) $3,500,000
3. How much do you need to contribute each year to fund your retirement?
A) $1,129
B) $4,309 C) $5,226
D) $14,126
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