1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
iren2701 [21]
2 years ago
10

You plan to retire in 19 years. At the point of retirement, you want to be able to withdraw 32,877 at the end of each year forev

er. Assume that you earn a 7.29% rate of return prior to retirement and an 5.02% rate of return after retirement. If you do not want to make any further contributions to your retirement fund, how much do you need today? Round answer to the nearest dollar.
Business
1 answer:
xz_007 [3.2K]2 years ago
3 0

Since no any further contributions will be made to the retirement fund, the amount you need today is $172,014.

<h3>Calculation of Present Value and Present Value of a Perpetuity</h3>

The first step is to calculate the present value (PV) of the contribution at the point of retirement in 19 years using the formula for calculating the present value (PV) of perpetuity as follows:

PV in 19 years = CF / R ............................................. (1)

Where;

PV in 19 years = Present value (PV) of the contribution at the point of retirement in 19 years = ?

CF = Cash flow or yearly expected withdrawal = $32,877

R = Rate of return after retirement = 5.02%, or 0.0502

Substituting the values into equation (1), we have:

PV in 19 years = $32,877 / 0.0502 = $654,920.3187251

The amount you need today can be calculated using the present value formula as follows:

PV = FV / (1 + r)^n ……………………………………………. (2)

Where;

PV = Present value or the amount you need today = ?

FV = Future value or PV in 19 years = $654,920.3187251

r = rate of return prior to retirement = 7.29%, or 0.0729

n = number of years = 19

Substituting the values into equation (2), we have:

PV = $654,920.3187251 / (1 + 0.0729)^19 = $654,920.3187251 / 3.80737505803714 =  $172,013.607470218

Rounding to the nearest dollar, we have:

PV = $172,014

Therefore, the amount you need today is $172,014.

Learn more about present value here: brainly.com/question/17322936.

You might be interested in
In a SWOT analysis, what are strengths?
guajiro [1.7K]

Answer:

A SWOT analysis is an evaluation of your company's strengths, weaknesses, opportunities, and threats.

Explanation:

https://emissary.edg.com ...

3 0
2 years ago
Stephanie Archer has been saving her money to buy a BMW convertible. Archer has spent hours on the BMW Web site choosing the ext
valentinak56 [21]

Archer has been using BMW's marketing Web site. This is a <u>true</u> statement.

<u>Explanation</u>:

A website is a collection of web pages that provides content related to the search. Many businesses have separate website for featuring and selling their product.

In the above scenario, Stephanie was surfing marketing website of the BMW Company. She wishes to purchase a BMW convertible car. So she was saving money to purchase it. Stephanie spent many hours on the BMW website to study about the various options and models available in the car. She was also choosing the interior and exterior colors of the car.

6 0
3 years ago
JPR Company's preferred stock is currently selling for $28.00, and pays a perpetual annual dividend of $2.00 per share. Underwri
scoundrel [369]

Answer:

8%

Explanation:

Data provided in the question

Current selling price of the preferred stock = $28

Annual dividend = $2 per share

Flotation cost = $3 per share

Firm tax rate = 40%

So by considering the above information, the cost of new preferred stock is

= Annual dividend per share ÷ (Current selling price of the preferred stock - Flotation cost)

= $2 ÷ ($28 - $3)

= $2 ÷ $25

= 8%

We simply applied the above formula so that the cost of preferred stock could arrive

7 0
3 years ago
Assuming that the physical output (i.e., the actual quantity of all final goods and services) of all final goods and services re
joja [24]

Answer:

a) true

Explanation:

A rise in the general price level is called inflation and it affects the nominal value of the company's output. E.g. you sell pants and last year they sold at $10 and now since inflation rate is 10%, they sell at $11. But inflation only affects nominal values, it doesn't affect real values which are calculated using a base price of a certain year X, times the quantity sold. Following the example, your real output would not be $11 per pair of pants, instead it would still remain at $10 since the inflation is discounted.

5 0
3 years ago
Lindy Corporation has 1,000,000 authorized shares of $20 par value common stock. As of June 30, 2014, there were 600,000 shares
sertanlavr [38]

Explanation:

The journal entries are as follows

a. Retained earnings A/c Dr $300,000  (600,000 shares × $0.50)

             To Dividend payable A/c $300,000

(Being the dividend is declared)

b. No journal entry is required

c. Dividend payable A/c $300,000

              To Cash A/c $300,000

(Being the dividend is paid for cash is recorded)

3 0
3 years ago
Other questions:
  • Which of these statements regarding Regal Marine is TRUE? Product design is a critical decision for the firm. Regal uses a three
    10·1 answer
  • 9 The HR planning at the National Level is generally done by __________.
    9·1 answer
  • A general partner is responsible for any debts of the partnership, regardless of whether he or she was directly involved in the
    8·1 answer
  • ABC Company, which is headquartered in the U.S., has its production plant located in a less- developed country. In this producti
    11·1 answer
  • Identify the term that refers to agreements made between researchers and subjects, through the consent process, and how research
    8·1 answer
  • Your coin collection contains fifty-four 1941 silver dollars. Your grandparents purchased them for their face value when they we
    14·1 answer
  • Carmel Corporation is considering the purchase of a machine costing $47,000 with a 7-year useful life and no salvage value. Carm
    7·1 answer
  • The project management institute initially published the _________ to address the need to bridge the gap between organizational
    7·1 answer
  • The material wealth of a society is a function of? all financial assets. all real assets. all financial and real assets. all phy
    7·1 answer
  • Your textbook notes a new form of policy experiment that would provide everyone with a guaranteed income called.
    7·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!