Microsoft Co. places 150,000 in an investment that has a return of 8%. The investment is placed there for 12 years, and then at the end of 12th year, annual withdrawals begin and continue for 6 years. What is the annual amount that may be withdrawn during the 6-year period?

Microsoft Co. places 150,000 in an investment that has a return of 8%. The investment is placed there for 12 years, and then at the end of 12th year, annual withdrawals begin and continue for 6 years. What is the annual amount that may be withdrawn during the 6-year period?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

See similar textbooks

Related questions

Q: How much money would have to be deposited today to accumulate:

A: A theory that helps to compute the present or future value of the cash flows is term as the TVM…

Q: Suppose an investment of P100,000 was made, and it matured to P104,070.70 after eight (8)…

Q: A company is considering an investment of €50.000 made at the beginning of the year for a period of…

Q: The management of Amex Corp. plans to meet a future capital expenditure by depositing $25,000 into a…

A: The present value of the investment is the amount that one invest in the current period. The future…

Q: GHA Co. made an investment of $10,000 and from this it will receive $800 annually for the next 18…

A: The present value of the annuity factor is used when there is an equal series of cash flows and the…

Q: $4000 is invested for a period of 5 years at a rate of 8%, compounded every 2 months. What will be…

A: Future Value The future value is the amount that will be received at the end of a certain period.…

Q: Norton Company has a 12% interest rate. If the firm invests $60,000 today, how much will have…

A: The Future Value: The value accumulated by an investment made today, at a given interest rate at the…

Q: Crane Telecommunications Corp. has made an investment in another company that will guarantee it a…

A: The present value is the value of the sum received at time 0 or the current period. It is the value…

Q: A company is considering buying workstation computers to support its engineering staff. In today's…

A: Given: i = 16%, f = 10% To Find the amount of payment, first we have to calculate i: i = i - f…

Q: Ransport Company has made an investment in another company that will guarantee it a cash flow of…

A: Working note:

Q: Walken Hardware is adding a new product line that will require an investment of $1,530,000. Managers…

A: Payback period is The length of time required for an investment to generate cash flows sufficient to…

Q: You want to make an investment of $2,000,000 in new equipment which is expected to generate $230,000…

A: Given: Investment = $2,000,000 Revenue = $230,000

Q: The karson transport company currently has net operating income of $508,000 and pays interest…

A: The times' interest earned ratio (TIE) is a financial ratio that compares a company's earnings…

Q: If Quail Company invests $50,000 today, it can expect to receive $10,000 at the end of each year for…

A: Introduction: The net present value of a capital asset is a metric that measures whether or not to…

Q: $6,000 is invested at a rate of 2% compounded continuously for the first 2 years, then at a rate of…

A: Amount to be invested (P) = $6000 Interest rate for first 2 years = 2% Interest rate for next 2…

Q: A company is comparing two investments. Both require an initial investment of $2,500. Investment A…

A: Initial investment = $ 2500 Investment A returns in eight years = $4,700 investment B returns in 12…

Q: A firm, whose cost of capital is 9 percent, may acquire equipment for $110,783 and rent it to…

A: Net Present Value (NPV) is a capital budgeting technique which uses a discount rate to bring all the…

Q: Hurkin Manufacturing Company pays accounts payable on the tenth day after purchase. The average…

A: Working capital is the cash needed to run a firm on a day-to-day basis, such as purchasing raw…

Q: An investment of P40,000 has a revenue of X pesos at the end of the first and second year. Given a…

A: When net present worth is zero that means present value of cash flow is equal to initial investment…

Q: Suppose that $2700 is invested in an account with an APR of 3.9% compounded continuously. Determine…

A: Future value = Present value*e^rate*time

Q: Scotia Bank Ltd. promises to pay 2.75% in the first year, 3.25% in the second year, 3.75% in the…

A: Interest Rates: Year Interest Rate 1 2.75% 2 3.25% 3 3.75% 4 4.00% Investment = 15,000…

Q: Rene's Fuel and Oil company is planning to expand in 9 year time. To prepare for this expansion,…

A: Future Value of Ordinary Annuity refers to the concept which determines the sum total of all the…

Q: How much must be deposited

A: An Annuity is a series of payments of fixed amounts and at fixed intervals. These can be of two…

Q: A financial investment equal to BRL 100,000.00 allows a withdrawal of BRL 20,000.00 in the first…

A: Investment BRL 1,00,000.00 Withdrawal BRL 20,000.00 Annual growth 2% Time Period 10…

Q: What annual rate of return is earned on a $1,000 investment when it grows to $2,700 in eight years?…

A: A concept through which it is studied that the current worth of money is higher than its future…

Q: company has a policy of requiring a rate of return on investment of 16%. two investment alternatives…

Q: A company is allocating $10 million to develop a new product. This money will be spent continuously…

A: Interest is an additional amount which is received on deposited amount. It increases the value of…

Q: EmKay Inc. has $1,000,000 available to invest. It has narrowed its choices to two investments, and…

A: a) Net present value (NPV) is the contrast between the present value of money inflows over some…

Q: An investment of $1,000 was made 35 years ago. What is the amount now at the market interest rate of…

A: FV = PV (1 + r)n where, FV = Future ValuePV = Present Valuer = Interest Raten = No.…

Q: An investment of P50,000 is made at the beginning of each month for 5 years. How much will the…

A: The investment value can be calculated as future value of annuity due

Q: i) If a continuous investment of $5,600 per year for 29 years leads to the accumulation of $500,000…

A: i) Annual investment (A) = $5600 n = 29 years Accumulated value = $500000 Let r = Continuously…

Q: What uniform annual series of cash flows over a 12-year period is equivalent to an investment of…

A: PVA=PMT 1+rn-1/r (1+r)n Present value annuityFVA=PMT1+rn-1/r Future value…

Q: A company has a policy of requiring a tate of return on investment of 13%. Two investment…

A: Required Rate of return =13% Alternative 1 Amount at the end of 5 year = $15,000 Amount at the end…

Q: Of the following five investments, which would have the lowest present value? Assume that the…

A: Assumption: Interest rate assumed is 10%.

Q: Each and every year $7,500 is invested at 4% annual compound interest.a. What is the value of the…

A: Part a) Value of investments at different time periods : Results obtained :

Q: What interest rate would be necessary for $7,950 investment to grow to $10,400 in an account…

A: Future Value refers to the value of the current asset or investment or of cash flows at a specified…

Q: Suppose that annual income from a rental property is expected to start at P65,000 per year and…

A: Present equivalent refers to the current value of the amount that will be on some future date. It…

Q: A $90,000 investment is made. Over a 5-year period, a return of $30,000 occurs at the end of the…

A: Net Present Value is the difference between the present value of cash inflows and cash outflows.

Q: Five years ago, you entered into a 10-year investment with a simple interest of 4% per annum and a…

A: Simple interest is simple interest without considering the impact of compounding on that but…

Q: A small company plans to spend $10,000 in year 2 and $10,000 in year 5. At an interest rate of…

A: Equivalent annual worth analysis is done to determine the net worth after subtracting equivalent…

Q: An investment of $50,000 in R&D results in additional revenue of $28,720 after 5 years and another…

A: Rate of return will IRR of the investment

Q: A firm, whose cost of capital is 8 percent, may acquire equipment for $146,825 and rent it to…

A: Given: Particulars Amount Cost of capital 8% Acquire equipment $146,825 Years 5 Rent…

Q: Blossom Telecommunications Corp. has made an investment in another company that will guarantee it a…

A: Present Value is current value of Future payment. Present value of Investment = Annual Payment *…

Q: A company receives 13.78% per year from accounts. They are considering a project that will force…

A: present value of annuity (PVA): PVA=A×1-11+RNRwhere,A=annuityR=interest rateN=number of years…

Q: Net revenues at an older manufacturing plant will be $2 million for this year. The net revenue will…

A: The present value of the cash flow is the current worth of a cash flow at a certain rate of interest…

Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Microsoft Co. places 150,000 in an investment that has a return of 8%.

The investment is placed there for 12 years, and then at the end of 12th year, annual withdrawals begin and continue for 6 years. What is the annual amount that may be withdrawn during the 6-year period?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

A $90,000 investment is made at t=0, and returns are realized over a 5-year period. A return of $30,000 occurs at the end of the first year. Each successive year yields a return that is 12% less than the previous year's return. If money is worth 5%, what is the equivalent present worth for the investment? $
P2000 is invested in a high interest account for one and half (1 1/2) years . the interest rate is 10.5 per annum and it is paid into the account every six months. calculate the value of the investment after this time and the amount of interest earned. Please answer with explanation. I will really upvote
Assume that an investment of $9000 earns an APR of 6% compounded monthly for 16 months. How much money is in your account after 16 months? (Round your answer to the nearest cent.) $ How much of the money in your account after 16 months is interest? (Round your answer to the nearest cent.)
A company estimates that it must make annual investments of $ 53828 over a 23-year period after 4 years from now. How much would the company have to invest now at an interest rate of 3% per year to sufficiently provide for the annual payments, if the first payment will begin end of 4th year from now?
A certain amount of investment was made annually for 10 years at an interest rate of 6%. On the 14th year, withdrawals of 10,000 per year can be made for 5 years and an indefinite withdrawal of 5000 per year after. If the investment will stop at the 5th year, how much should be invested on the 5th year to get the same amount of withdrawals on the same period? All payments and withdrawals are made at the beginning of each year.
ABC Corporation has invested $2.5 million every 3 months in an investment which earns interest at the rate of 10.5% per year compounded quarterly. The first investment will be at the end of this current quarter. To what sum will the investment grow at the end of 5 years? How much interest will be earned during this period? After 5 years the corporation give loan to XYZ Company that accumulated amount for another 3 years. What amount finally ABC Corporation will have after 8 years time. How much interest will be earned after 8 years.
An investment of P50,000 is made at the beginning of each month for 5 years. How much will the investment be at the end of the term, if interest is 6% compounded monthly? A. P3,600,526.35 B. P3,552.839.24 C. P3,505,944.00 D. P3,649.020.00
. GHA Co. made an investment of $10,000 and from this it will receive $800 annually for the next 18 years (starting one year from now). The interest rate that GHA will be earning is between ____% and ____%.
An investment account offers a 12% annual return. If $50,000 is placed in the account for two years, by how much will the investment grow if interest is compounded (a) annually, (b) semiannually, (c) quarterly, or (d) monthly? (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use tables, Excel, or a financial calculator. Round your answers to 2 decimal places.)
An investment will return $125 at the end of each month for 5 years and then $250 at the end of each month for the next 3 years. What is the present value of the earnings on this investment calculated at the annual rate of 6.00% per year compounded monthlty (0.5%) per month?
An investment consists of a uniform series of 9 payments of $1,000 each at the end of the first year through the end of the ninth year. At the end of 10 years, an amount of $14,193 will be paid to the investor. What is the annual internal rate of return on the investment?
Consider a floor that has a principal amount of $10 million. The tenor is 3 months, the life of the floor is 5 years, and the floor rate is 5% (compounded quarterly). On a reset date, 3- month LIBOR is 4.2% per annum. What payment will the holder of the floor receive?