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yarga [219]
4 years ago
5

Steven, age 43, earns $80,000 annually; and his wage replacement ratio has been determined to be 80%. He expects inflation will

average 3% for his entire life expectancy. He expects to work until 68, and live until 90. He anticipates an 8% return on his investments. Additionally, Social Security Administration has notified him that his annual retirement benefit, in today's dollars will be $26,000. Using the capital needs / annuity method. Calculate how much capital Steven will need.
Business
1 answer:
julsineya [31]4 years ago
7 0

Answer:

Steven will need a capital of $1,061,342.10

Explanation:

Annual Savings

= $80,000*0.8

= $64,000.00

Period

= 68 - 43

= 25  

Future Value of annual savings

= FV

= $64000*(1 + 0.03)^25

= $134,001.79

Future Value of social security

= FV

= $26000*(1 + 0.03)^25

= $54,438.23

Annual Investment required at age of 68

= $134,001.79 - $54,438.23

= $79,563.56  

Present value of a number of cash flows over his retirement years,

Inflation Adjusted Rate

= (1.08/1.03) - 1

= 4.85%  

Period

= 90 - 68

= 22  

Capital Required

= PV(4.85%,22,-79563.56)

= $1,061,342.10  

Therefore, Steven will need a capital of $1,061,342.10

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A project initially costs $40,500 and will not produce any cash flows for the first 2 years. Starting in Year 3, it will produce
melisa1 [442]

Answer:

Net present value = $2063.1922

Explanation:

given data

initially costs = $40,500

cash flows = $34,500

final cash inflow = $12,000

required rate of return = 18.5 percent

solution

The cash flows is  

Year 0 =  $40500

Year 1 = $0

Year 2 = $0

Year 3 = $34500

Year 4 = $34500

Year 5 = $0

Year 6 = $12000

so  Net present value will be express as

Net present value = -Initial cash outflow + Present value of future cash flows ...............1

Present value of future cash flows = (cash flow in year n) ÷ (1 + required rate of return)^t   ..........................2

put here value we get

Present value = \frac{0}{(1+0.185)^1} + \frac{0}{(1+0.185)^2} + \frac{34500}{(1+0.185)^3} + \frac{34500}{(1+0.185)^4} + \frac{0}{(1+0.185)^5} + \frac{12000}{(1+0.185)^6}    

Present value = $42563.1922    

Net present value= -$40500 + $42563.1922

Net present value = $2063.1922

8 0
4 years ago
Corporation includes $200,000 of $1 par common stock and $400,000 par of 6% cumulative preferred stock. The board of directors o
vlabodo [156]

Answer:

The amount of dividends paid to common stockholders in 2021 $18000.

Explanation:

The cumulative preferred stock is the stock that accumulates dividends when the dividends are partially or not paid at all in a certain year. The dividends must be paid in the future.

The common stock holders are paid after the preferred stockholders are paid.

The preferred stock dividend per year = 400000 * 0.06 = $24000 per year

As the cash dividends paid in 2019 and 2020 are $20000 each,

The dividend outstanding on preferred stocks for 2019 is = 24000 - 20000 = $4000

Similarly, the dividends outstanding on preferred stocks for 2020 is = 24000 - 20000 = $4000

The total dividends outstanding at start of 2021 = 4000 + 4000 = $8000

Preferred dividend for 2021 = 24000

Total dividend on preferred stock = 24000 + 8000 = $32000

The amount of dividends that common stock holders will receive in 2021 = 50000 - 32000 = $18000

4 0
3 years ago
Financial assets A. directly contribute to the country's productive capacity. B. indirectly contribute to the country's producti
arsen [322]

Answer:

The correct answer is B

Explanation:

Financial assets are those assets which is defined as the liquid assets and that derive or gets its value from the ownership claim or the contractual right. Its example are bank deposits, cash, mutual funds, bonds and stocks.

These are contributed indirectly to the productive capacity of the country because these (financial assets) permit or allow the individuals or business to invest in governments or firms, which in return allow the government and business to increase the productive capacity.

6 0
3 years ago
Assume that over the past 88 years, u. S. Treasury bills had an average return of 3. 5 percent as compared to 6. 1 percent on lo
zheka24 [161]

The average nominal risk premium on the long-term government bonds was 2.6 percent.

A risk premium is the expected investment return on an asset that is higher than the risk-free rate of return. The risk premium on an asset is a form of compensation for investors. It compensates investors for tolerating the additional risk in a given investment over that of a risk-free asset. Subtracting the return on risk-free investment from the return on investment yields the risk premium.

The nominal risk premium is:

Nominal Risk-Free Rate - Inflation Premium = Real Risk-Free Rate. Nominal rates are the rates we encounter on a daily basis, such as interest rates from banks and other financial institutions.

Nominal risk premium = 6.1 % -3.5 %

= 2.6%.

Learn more about risk premium here-

brainly.com/question/15570868

#SPJ4

8 0
2 years ago
Last year, J&H Corp. reported a book value of exist700 million in current assets, of which 15% is cash, 17% is short-term In
Umnica [9.8K]

Complete Question

The  complete question is shown on the first uploaded image

Answer:

The  correct stalemates are

The company is using -$14 million in net operating working capital  

acquired by investor supplied funds.

Based on the information on industry averages , other players in the industry

would generate higher profits than J&H Corp , if they had no debt and  

held no financial assets

Explanation:

The  calculation is shown on the second and third uploaded image

8 0
4 years ago
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