How much will you have in your retirement account

Reference no: EM132175179

Question -

(a) Angle plc, a Swiss -based electronics ltd has financed its operations through the following: debt account for 20% and equity account for 80% of total market value. The risk -free rate of interest is 3 %, an estimated market risk premium would be 6 % and the equity beta for Angle is 0.67. The firm has a yield to maturity on its debt of 6% and its tax rate is 35%.

Required: Calculate an estimate of this firm's WACC?

(b) Suppose Angle plc is considering introducing a new miniature hearing aided. The cost of developing and bringing to market is $190 million, but Angle expects net cash flows from the product are expected as follows:

Year	$ million
1	25
2	35
3	45
4	60
5	45
6	15

Required: Calculate the net present value and discounted pay-back in year and months for this project using cost of capital calculated in (a) above. Discuss any other factors that Angle plc should consider before arriving at a decision.

You are trying to decide how much to save for retirement. Assume You plan to save $5,000per year with the first investment made 1 year from now. You think you can earn 10% per year on your investments and you plan to retire in 43 years, immediately after making your last $5,000 investment.

a. How much will you have in your retirement account on the day you retire?

b. If, instead of investing $5,000 per year, you wanted to make one lump-sum investment today for your retirement that will result in the same retirement saving, how much would that lump sum need to be ?

c. Assuming the most you can afford to save is $ 1,000 per year, but you want to retire with $ 1 million in your investment account, how high of a return do you need to earn on your investments?

Reference no: EM132175179

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