You are planning for a very early retirement. You would like to retire at age 40 and have enough money saved to be able to withdraw $210,000 per year for the next 40 years (based on family history, you think you will live to age 80). You plan to save by making 10 equal annual installments (from age 30 to age 40) into a fairly risky investment fund that you expect will earn 8% per year. You will leave the money in this fund until it is completely depleted when you are 80 years old. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) (Click the icon to view Future Value of $1 table.) (Click the icon to view Future Value of Ordinary Annuity of $1 table.) Read the requirements. RE Requirement 1. How much money must you accumulate by retirement to make your plan work? (Hint: Find the present value of the $210,000 withdrawals.) (Round your final answer to the nearest whole dollar.) To make the plan work, you must accumulate this amount by retirement Requirement 2. How does this amount compare to the total amount you will withdraw from the investment during retirement? How can these numbers be so different? Over the course of your retirement you will be withdrawing However, by age 40 you only need to have invested These numbers are different because: O A. You need to have the same amount accumulated as you will withdraw because you will not earn further interest on your investment when you reach retirement. OB. You need to have far less accumulated than what you will withdraw because you only withdraw a portion of the investment every yearthe balance remains invested where it continues to earn 8% interest. O c. You need to have far more accumulated than what you will withdraw because you will withdraw a large portion of the investment every yearthe balance remains invested where it continues to earn 8% interest. OD. None of the above Use the NPV method to determine whether Kyler Products should invest in the following projects: Project A: Costs $290,000 and offers seven annual net cash inflows of $56,000. Kyler Products requires an annual return of 12% on investments of this nature. Project B: Costs $390,000 and offers 9 annual net cash inflows of $74,000. Kyler Products demands an annual return of 10% on investments of this nature. (Click the icon to view Present Value of $1 table.) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) 1 Read the requirements CERED Requirement 1. What is the NPV of each project? Assume neither project has a residual value. Round to two decimal places. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Caclulate the NPV (net present value) of each project. Begin by calculating the NPV of Project A. Project A: Net Cash Annuity PV Factor Years (i=12%, n=7) Present value of annuity Present Inflow Value 1 - 7 0 Investment Net present value of Project A Calculate the NPV of Project B. Project B: Years Present Net Cash Inflow Annuity PV Factor (i=10%, n=9) Value 1-9 Present value of annuity 0 Investment Net present value of Project B Requirement 2. What is the maximum acceptable price to pay for each project? Maximum Acceptable Price Project A Project B Requirement 3. What is the profitability index of each project? (Round to two decimal places, X.XX.) Select the formula, then enter the amounts to calculate the profitability index of each project. Profitability Index Project A Project B + Nord Industries is deciding whether to automate one phase of its production process. The manufacturing equipment has a six-year life and will cost $915,000. Projected net cash inflows are as follows: (Click the icon to view the projected net cash inflows.) (Click the icon to view Present Value of $1 table.) $1 ) (Click the icon to view Present Value of Ordinary Annuity of $1 table.) Read the requirements Requirement 1. Compute this project's NPV using Nord's 16% hurdle rate. Should Nord invest in the equipment? Use the following table to calculate the net present value of the project. (Enter any factor amounts to three decimal places, X.XXX. Use parentheses or a minus sign for a negative net present value.) Net Cash PV Factori Years Inflow = 16%) Present Value Year 1 Present value of each year's inflow: (n = 1) Year 2 Present value of each year's inflow: (n = 2) Year 3 Present value of each year's inflow: (n = 3) Year 4 Present value of each year's inflow: (n = 4) Year 5 Present value of each year's inflow: (n = 5) Year 6 Present value of each year's inflow: (n = 6) ) Total PV of cash inflows Year 0 Initial investment Net present value of the project Nord Industries invest in the equipment. Requirement 2. Nord could refurbish the equipment at the end of six years for $106,000. The refurbished equipment could be used one more year, providing $77,000 of net cash inflows in year 7. Additionally, the refurbished equipment would have a $54,000 residual value at the end of year 7. Should Nord invest in the equipment and refurbish it after six years? (Hint: In addition to your answer to Requirement 1, discount the additional cash outflow and inflows back to the present value.) Calculate the NPV of the refurbishment. (Enter any factor amounts to three decimal places, X.XX. Use parentheses or a minus sign for cash outflows and for a negative net present value.) Cash PV Factor (i = (outflow inflow 16%) Present Value Refurbishment at the end of Year 6 (n = 6) Cash inflows in Year 7 (n = 7) Residual value (n = 7) = 7 Net present value of the refurbishment The refurbishment provides a NPV. The refurbishment NPV is to overcome the original NPV of the equipment. Therefore, the refurbishment alter Nord Industries' original decision regarding the equipment investment