Retirement goal

Assignment Help Financial Management
Reference no: EM131850102

Your father is 50 years old and will retire in 10 years. He expects to live for 25 years after he retires, until he is 85. He wants a fixed retirement income that has the same purchasing power at the time he retires as $45,000 has today. (The real value of his retirement income will decline annually after he retires.) His retirement income will begin the day he retires, 10 years from today, at which time he will receive 24 additional annual payments. Annual inflation is expected to be 5%. He currently has $245,000 saved, and he expects to earn 9% annually on his savings. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.

How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal? Do not round your intermediate calculations. Round your answer to the nearest cent.

Reference no: EM131850102

Questions Cloud

Organization decides to employ break-even analysis : A manager in your organization decides to employ a break-even analysis. Of what shortcomings should this manager be aware?
Offered unique financial instrument : If you are offered a unique financial instrument which pays you $125,000 every other year over twelve year period and demand 9% return, what is present value.
Understand the valuation process of bonds and stocks : Why is it important for financial managers to understand the valuation process of bonds and stocks? What are examples of key inputs to the valuation process?
How to calculate the covariance in equation of correlation : How to calculate the covariance in the equation of the correlation? what is the formula for the covariance? give an example?
Retirement goal : How much must he save during each of the next 10 years (end-of-year deposits) to meet his retirement goal?
Economically equivalent for an annual compound interest : What is the value of Y so that the two cash flows given below are economically equivalent for an annual compound interest of 5.9%?
What is the future value at the end of year five of a series : What is the future value at the end of year 5 of a series of 3 deposits?
Effective annual rate : You plan to deposit $1, 500 annually, with the first payment to be made a year from today, in an account that pays a 5% effective annual rate.
What is the bond nominal yield to maturity : A 10-year, 10% semiannual coupon bond has a par value of $1,000. The bond has a price of $1,150. What is the bond’s nominal yield to maturity?

Reviews

Write a Review

Financial Management Questions & Answers

  What is the aftertax cost of debt

Henry is trying to determine Franco Inc’s cost of debt. The firm has a debt issue outstanding with 17 years to maturity that is quoted at 90 percent of face value. The issue makes semiannual payments and has a coupon rate of 6 percent annually. What ..

  What will the cash flows for the project be

You are evaluating a project for The Ultimate recreational tennis racket, guaranteed to correct that wimpy backhand.- What will the cash flows for this project be?

  What are the limitations of financial leverage

How does the choice in manufacturing facilities impact operating leverage? What are the benefits and disadvantages of various labor models?

  American type and european type

We discussed options as part of our derivatives chapter. Accordingly, we compared two types of options: 1) American type and 2) European type.

  Standard deviation of the expected return

Explain the answers and show supporting calculations. Stock X has an expected return of 8% and the standard deviation of the expected return is 9%.

  Aftertax cost of debt-what is the cost of equity

Kose, Inc., has a target debt–equity ratio of 1.30. Its WACC is 9.3 percent, and the tax rate is 38 percent. If Kose’s cost of equity is 15 percent, what is its pretax cost of debt? If instead you know that the aftertax cost of debt is 6.2 percent, w..

  Colleague who had no prior experience with statistics

One part of the chapter defines the terms MAE, MSE, and MAPE. What do these letters represent? How would you describe the general purpose of these metrics to a friend or colleague who had no prior experience with statistics? Which, if any, of these i..

  Explain the intuition behind this convergence to par value

Teach me this concept taking care to explain the intuition behind this convergence to PAR value

  Dollar value of earnings remitted

Assume a Canadian firm iniates direct foreign investment in the U. S. the Canadian dollar is expected to depreciate against the U. S. dollar. The C$ dollar value of earnings remitted to the parent Canadian company should:

  Average does it take the firm to sell an inventory item

Bob Gibson's has sales for the year of $311,400, cost of goods sold equal to 78 percent of sales, and an average inventory of $42,800. The profit margin is 6 percent and the tax rate is 35 percent. How many days on average does it take the firm to se..

  Net salvage value

Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cost $22 million, of which 85% has been depreciated. The used equipment can be sold today for $5.5 million, and its tax rate is 35%. What is the equipment'..

  Why are options granted to top corporate executives

Futures contracts contrast with forward contracts by doing which of the following? Why are options granted to top corporate executives?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd