Perpetuity payment starts on the day of retirement

Assignment Help Financial Management

Reference no: EM131072091

You would like to have enough money saved to receive a $50,000 per year perpetuity , after retirement so that you and your family can lead a good life . How much would you need to save in your retirement fund to achieve this goal (assume that the perpetuity payment starts on the day of retirement. the interest rate is 8%)?

Reference no: EM131072091

Questions Cloud

About the security market line : The security market line (SML) is an equation that shows the relationship between risk as measured by beta and the required rates of return on individual securities. If inflation increases by 1% but there is no change in investors' risk aversion, wha..

Risk is important concept affecting security prices : Risk is an important concept affecting security prices and rates of return. Risk is the chance that some unfavorable event will occur, and there is a trade-off between risk and return. The higher an investment’s risk, the equivalent Item 1 the return..

What is the constant annual-equivalent cash flow : A new furnace will cost $27,000 to install and will require maintenance of $1,500 a year. But it is more efficient than your old furnace and will reduce your heating oil consumption by 2400 gallons per year. What is the payback period and discounted ..

Uses only debt and common equity : Midwest Electric Company (MEC) uses only debt and common equity. It can borrow unlimited amounts at an interest rate of rd = 9% as long as it finances at its target capital structure, which calls for 40% debt and 60% common equity. What is its cost o..

Perpetuity payment starts on the day of retirement : You would like to have enough money saved to receive a $50,000 per year perpetuity , after retirement so that you and your family can lead a good life . How much would you need to save in your retirement fund to achieve this goal (assume that the per..

Encounters cash flow problems due to growth : Prepare a topical paper that explains to Home Solutions the problems a firm can experience when it encounters cash flow problems due to growth. Outline at least two possible business options Home Solutions could try in order to avoid these problems b..

You have to invest now in order to achieve this goal : Suppose you will need $50,000 in 4 years to start up a new business you have planned. With a 5% real interest rate, how much do you have to invest now in order to achieve this goal?

What are annual after-tax cash flows associated with project : The Chung Chemical Corporation is considering the purchase of a chemical analysis machine. Although the machine being considered will result in an increase in earnings before interest and taxes of $35,000 per year, it has a purchase price of $100,000..

Discuss the differences in short- term and long-term markets : Identify the relevant factors that affect interest rate movements through an analysis of Treasury's decision and provide examples. Explain the effect of the Treasury's decision on the term structure if short-term and long-term markets are segmented a..

User Account

All Pages