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MBA Finance Problem




Question;Excel is a great tool for solving problems, but with many;time value ofMONEY problems, you may still need to draw a time line. For;example, consider a classic retirement problem. A friend is celebrating her;birthday and wants to start saving for her anticipated retirement. She has the;following years to retirement and retirement spending goals;years until retirement 30;amount to withdraw each year $90,000;years to withdraw in retirement 20;interest rate 8%;Because your friend is planning ahead, the first withdrawal;will not take place until one year after she retires. She wants to make equal;annual deposits into her account for her retirementFUND.;a) If she starts making these deposits in one year and makes;her last deposit on the day she retires, what amount must she deposit annually;to be able to make the desired withdrawals in retirement?;b) Suppose your friend has just inherited a large sum;ofMONEY. Rather than making equal annual payments, she has decided to make one;lump sum deposit today to cover her retirement needs. What amount does she have;to deposit today?;c) Suppose your friend's employer will contribute to the;account each year as part of the company's profit sharing plan. In addition;your friend expects a distribution from a family trust several years from now.;What amount must she deposit annually now to be able to make the desired;withdrawals in retirement? The details are;employer's annual contribution $1,500;years until trustFUND distribution 20;amount of trustFUND distribution $25,000


Paper#48952 | Written in 18-Jul-2015

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