You are a financial adviser working with a client who wants to retire in eight y
ID: 2509147 • Letter: Y
Question
You are a financial adviser working with a client who wants to retire in eight years. The c ent has a savings account with a local bank that pays 7% annual interest. The cient wants to deposit an amount that will provide her with $1,008,500 when she retires. Currently, she has $303,400 in the account. (FV of $1, PV of S1. FVA of $1, and PVA ofS1) (Use the appropriate factorís) from the tables provided.) How much additional money should she deposit now to provide her with $1,008,500 when she retires? (Round your answer to nearest whole dollar.) l deposit amountExplanation / Answer
1) Required Future Value after eight year (i.e at the time of retirement) = $1,008,500
Present Value Factor(8 yrs, 7%) = 0.5820091
Required Present Value of deposit = Future Value*PVF(8 yrs, 7%)
Required Present Value of deposit = $1,008,500*0.5820091 = $586,856
Additionl Deposit Amount = Total Deposit Required - Amount already deposited in account
= $586,856 - $303,400 = $283,456
2) The deposit required today will be equal to present value of each withdrawal of $20,100 for four years by Judge's granddaughter.
Deposit Amount = Withdrawal for Tuition*PVAF(4 yrs, 8%)
= $20,100*3.31212684 = $66,574
Therefore Judge should deposit $66,574 today to provide Emma with a fund to pay for her college tuition.
3) Cost of goods sold per day = Cost of goods sold for current year/365 days in a year
= $1,146,000,000/365 days = $3,139,726.03
Average Number of days payable outstanding = Current Year Ending Accounts Payable/COGS per day
= $214,000,000/$3,139,726.03 = 68 days
Therefore Columbia's accounts payable are outstanding for 68 days.
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