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VLD [36.1K]
1 year ago
11

Peter and Blair recently reviewed their future retirement income and expense projections. They hope to retire in 24 years and an

ticipate they will need funding for an additional 16 years. They determined that they would have a retirement income of ​$77,500 in​ today's dollars, but they would actually need ​$112,000 in retirement income to meet all of their objectives. Calculate the total amount that Peter and Blair must save if they wish to completely fund their income​ shortfall, assuming a 5 percent inflation rate and a return of 13 percent.
Business
1 answer:
alisha [4.7K]1 year ago
4 0

Answer: Peter and Blair need to save 4,105.10 USD per year for 35 years until retirement. Peter and Blair actually need 88,241 USD in retirement income to meet all of their objectives.Current amount they have = 64,000 USD  Time period of Retirement = 35 yearsAdditional Years = 26 yearsInflation rate = 4%Rate of return = 9% So, we have all of that data to solve the problem. Then let's do it. Our first step is to calculate the real rate of return by incorporating the inflation rate into it. Note: we have been given rate of return not the real rate of return.Real Rate of Return = ( 1 + ROR given)/(1+ inflation rate) - 1Real Rate of Return = ( 1+ 0.09)/(1 + 0.04) -1Real Rate of Return = 0.048 x 100 = 4.80% So, the real rate of retunr is = 4.80%Now, let's find out the what is the additional fund required in total:Additional funds required = Required - AvailableAdditional funds required = 88,241 - 64,000Additional funds required = 24,241 USDNow, we have to calculate the Present value of this additional funds required for the time period of 26 years. Present value can be calculated by using the finance calculator online. You have to put these data into the calculator to calculate the present value of the money. PMT = 24241Interest Rate (I/Y) = 4.80Number of Periods (N) = 26 yearsBy plugging in these numbers, you will the present value of 24,241 USD:Present Value = 355,770.28 USDNow, we have to calculate the amount of money Peter and Blair need to save every year till their retirement after 35 years.For that, I have used that finance calculator this time solving for PMT. You need to put following data into the calculator:Future Value = 355,770.28Number of periods(N) = 35 yearsInterest Rate (I/Y) = 4.80%Annual Payment (PMT) = 4105.10 USD It means Peter and Blair need to save 4,105.10 USD per year for 35 years until retirement.

Explanation:

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Creative product differentiation can enable a small business to increase market share.
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3 years ago
Turkey Hill Motor Homes currently sells 1,200 Class A motor homes, 2,600 Class C motor homes, and 4,000 pop-up trailers each yea
Colt1911 [192]

Answer:

The erosion cost = $ 49,190,000

Explanation:

Given:

Class A motor homes sold = 1,200

Class C motor homes sold = 2,600

pop-up trailers sold = 4,000

if the new camper is added,

decline in class A sales = 10%

Decline in class C sales = 2,100 units

Average cost of class A motor homes = $ 162,000

Average cost of class C  homes = $ 59,500

Selling price for the pop-ups = $ 5,500

cost of the new mid-range camper = $ 32,900

Now,

Erosion cost is given as = Total decline in revenue from the sales

= (Decline in class A sales × Average cost of class A motor homes ) + (Decline in class C sales × Average cost of class C motor homes )

Erosion cost = ( 0.10 × 1,200 × $ 162,000 ) + ( (2,600 - 2,100) × $ 59,500 )

or

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The erosion cost = $ 49,190,000

3 0
3 years ago
When originally purchased, a vehicle costing $23,040 had an estimated useful life of 8 years and an estimated salvage value of $
Novosadov [1.4K]

Answer:

$5,360

(not given in the options)

Explanation:

Depreciation is the systematic allocation of cost to an asset based on estimates. It is given as

Depreciation = (cost - salvage value)/useful life

When originally purchased, a vehicle costing $23,040 had an estimated useful life of 8 years and an estimated salvage value of $1,600

Annual depreciation = ($23,040 - $1,600)/8

= $2,680

After 4 years

Accumulated depreciation = 4 × $2,680

= $10,720

The net book value then

= $23,040 - $10,720

= $12,320  

Since the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value

New depreciation = ($12,320  - $1,600)/2

= $5,360

The depreciation expense in year 5 equals $5,360

8 0
3 years ago
Fischer Company uses 12,000 units of a part in its production process. The costs to make a part are: direct material, $15; direc
Trava [24]

Answer:

Difference= $60,000 in favor of buying

Explanation:

Giving the following information:

Number of units= 12,000

Make in-house:

Direct material, $15

direct labor, $27

variable overhead, $15

applied fixed overhead, $32

Buy:

Buying price= $60

If Fischer buys the part, 75 percent of the applied fixed overhead would continue.

<u>First, we will calculate the avoidable fixed overhead per unit:</u>

Avoidable fixed overhead= 32*0.25= $8

<u>Now, the total differential cost of making in-house:</u>

<u></u>

Total cost of production= 12,000*(15 + 27 + 15 + 8)

Total cost of production= 12,000*65

Total cost of production= $780,000

Total cost of buying= 60*12,000= $720,000

Difference= $60,000 in favor of buying

4 0
2 years ago
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