1. Andi Acquisition, Inc. is considering the purchase of Kristina Covington Company. The acquisition would require an initial investment of $190,000, but Andi?s after-tax net cash flow would increase by $50,000 per year and remain at this new level forever. Assume a cost of capital of 20 percent. Should Andi buy Kristina Company?

I. Yes, because the NPV = $60,000

II. No, because cost of capital < IRR

III. Yes, because the NPV = $50,000

IV. Yes, because the IRR < the cost of capital

V. None of the above.

2. After retirement, you expect to live for 25 years. You would like to have $75,000 in income each year and leave nothing behind for your descendants when you pass away. How much should you have saved in your retirement account to receive this income, if the interest is 9% per year? Assume your first withdrawal will be made on the day you retire, so you can begin to use your money immediately to pay your bills.

A) $736,693.47

B) $744,672.91

C) $802,995.88

D) $811,693.47

E) $6,924,298.27