Computation of Amount to be invested each year for a target future value and Net Present Value of alternate investment options.
1. Susan Robinson is planning for her retirement. She is 30 years old today and would like to have $600,000 when she turns 55. She estimates that she will be able to earn a 9 percent rate of return on her retirement investments over time; she wants to set aside a constant amount of money every year ( at the end of the year) to help achieve her objectives. How much money must Robinson invest at the end of each of the next 25 years to realize her goal of $600,000 at the end of that time?
2. Two investment opportunities are open to you: Investment 1 and Investment 2. Each has an initial cost of $10,000. Assuming that you desire a 10 percent return on your initial investment, compute the net present value of the two alternatives and evaluate their relative attractiveness:
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Investment 1
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Investment 2
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CasFlows
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Year
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Cash Flows
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Year
|
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$5,000
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1
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$8,000
|
1
|
|
6,000
|
2
|
7,000
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2
|
|
7,000
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3
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6,000
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3
|
|
8,000
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4
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5,000
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4
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