Problemyou have been hired as a pension fund manager for, Ask an Expert

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Problem:

You have been hired as a pension fund manager for TeleRed Corporation, a small manufacturing firm. The corporation currently has $5 million in the fund and expects to have cash inflows of $2 million a year for the first five years followed by cash outflows of $3 million a year for the next five years. Assume that interest rates are at 8%.

Required:

Question 1: How much money will be left in the fund at the end of the tenth year? (How would you figure this out/plug it into a financial calculator).

Question 2: If you were required to pay perpetuity after the tenth year out of the balance left in the pension fund, how much could you afford to pay?

Note: Show supporting computations in good form.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91168080

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