More Info 1. Irving just hit the jackpot in Las Vegas and won $30,000! If he inv
ID: 2431194 • Letter: M
Question
More Info 1. Irving just hit the jackpot in Las Vegas and won $30,000! If he invests it now at a 10% 2. Alan would like to have $2,500,000 saved by the time he retires in 40 years. How much 3. Assume that Maria accumulates savings of $1.5 million by the time she retires. If she interest rate, how much will it be worth in 20 years? does he need to invest now at a 14% interest rate to fund his retirement goal? invests this savings at 12%, how much money will she be able to withdraw at the end of each year for 20 years? 4. Faith plans to invest $6,500 at the end of each year for the next eight years. Assuming a 12% interest rate, what will her investment be worth eight years from now? ' Assuming a 10% interest rate, how much would Katie have to invest now to be able to withdraw $10,000 at the end of every year for the next nine years? Sammy is considering a capital investment that costs $525,000 and will provide the following net cash inflows 6. Net Cash Inflow 304,000 $202,000 $96,000 Year Using a hurdle rate of 8%, find the NPV of the investment. 7. What is the IRR of the capital investment described in Question 6?Explanation / Answer
Answer 1.
Amount Won = $30,000
Interest Rate = 10%
Period = 20 years
Future Value = $30,000 * FV of $1 (10%, 20)
Future Value = $30,000 * 6.727
Future Value = $201,810
Answer 2.
Desired Sum = $2,500,000
Interest Rate = 14%
Period = 40 years
Amount Invested = $2,500,000 * PV of $1 (14%, 40)
Amount Invested = $2,500,000 * 0.005
Amount Invested = $12,500
Answer 3.
Amount Saved = $1,500,000
Interest Rate = 12%
Period = 20 years
Annual Withdrawals = $1,500,000 / PVA of $1 (12%, 20)
Annual Withdrawals = $1,500,000 / 7.469
Annual Withdrawals = $200,830
Answer 4.
Annual Investment = $6,500
Period = 8 years
Interest Rate = 12%
Future Value = $6,500 * FVA of $1 (12%, 8)
Future Value = $6,500 * 12.300
Future Value = $79,950
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