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A couple will retire in 50 years; they plan to spend about $30,000 a year in retirement, which should last about 25 years. They believe that they can earn 8% nominal interest on retirement savings, and the couple realizes that the annual inflation rate is 4%.
a. If one pound of apples costs $1 today, how much will they cost by the time they retire?
b. The couple really wants to consume $30,000 a year in real dollars during retirement. What is the real amount of saving they need to accumulate by the time they retire?
c. How much will they have to save each year for the next 50 years, in real dollars, to reach their retirement goal?
d. How long does it take for the couple to triple their salary in real dollars?
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A project will generate $1 million net cash flow annually in perpetuity. If the project costs $7 million, what is the lowest WACC shown below that will make the NPV negative? A-10% B-12% C-14% D-16%
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Your uncle has $500,000 and wants to retire. He expects to live for another 30 years and to earn 6.5% on his invested funds. How much could he withdraw at the end of each of the next 30 years and end up with zero in the account?
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