PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Question
Chapter 2, Problem 34PS
Summary Introduction
To determine: The annual level of expenditure.
Summary Introduction
To determine: The annual level of expenditure at 4% inflation rate.
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Students have asked these similar questions
You estimate that by the time you retire in 35 years, you will have accumulated savings of $3.5 million.
a. If the interest rate is 10.0% and you live 15 years after retirement, what annual level of expenditure will those savings support? (Do not round intermediate calculations. Enter your answer in whole dollars rounded to 2 decimal places.)
b. Unfortunately, inflation will eat into the value of your retirement income. Assume a 6% inflation rate and work out a spending program for your $3.5 million in retirement savings that will allow you to increase your expenditure in line with inflation. What will be your expenditure amount in real terms for each year of your retirement? (Do not round intermediate calculations. Enter your answer in whole dollars rounded to 2 decimal places.)
Can you Please Answer Part B?
You estimate that by the time you retire in 35 years, you will have accumulated savings of
$3.2 million.
a. If the interest rate is 8.0% and you live 15 years after retirement, what annual level of
expenditure will those savings support?
Note: Do not round intermediate calculations. Enter your answer in whole dollars
rounded to 2 decimal places.
b. Unfortunately, inflation will eat into the value of your retirement income. Assume a 3%
inflation rate and work out a spending program for your $3.2 million in retirement
savings that will allow you to increase your expenditure in line with inflation. What will
be your expenditure amount in real terms for each year of your retirement?
Note: Do not round intermediate calculations. Enter your answer in whole dollars
rounded to 2 decimal places.
a. Annual expenditure
b. Real annual expenditure
You are planning to save $1.5 million for retirement over the next 34 years.
(a) If you are earning interest at the rate of 7% and you live 24 years after retirement, what annual level of living
expenses will those savings support?
(b) Suppose your retirement living expenses will increase at an annual rate of 2% due to inflation. Determine the
annual spending plan for the first year of retirement in line with your inflation.
Click the icon to view the interest factors for discrete compounding when i = 2% per year.
Click the icon to view the interest factors for discrete compounding when i = 7% per year.
(a) The annual level of living expenses is $
1030
(Round to the nearest dollar.)
Chapter 2 Solutions
PRIN.OF CORPORATE FINANCE
Ch. 2 - (FV) In 1880, five aboriginal trackers were each...Ch. 2 - Prob. 2SQCh. 2 - (PV) Your company can lease a truck for 10,000 a...Ch. 2 - (RATE) Ford Motor stock was one of the victims of...Ch. 2 - Prob. 5SQCh. 2 - Prob. 6SQCh. 2 - Prob. 7SQCh. 2 - (NOMINAL) What monthly compounded interest rate...Ch. 2 - Opportunity cost of capital Which of the following...Ch. 2 - Opportunity cost of capital Explain why we refer...
Ch. 2 - Prob. 3PSCh. 2 - Compound interest New Savings Bank pays 4%...Ch. 2 - Compound interest In 2017, Leonardo da Vincis...Ch. 2 - Future values If you invest 100 at an interest...Ch. 2 - Prob. 7PSCh. 2 - Future values In the five years preceding the end...Ch. 2 - Discount factors a. If the present value of 139 is...Ch. 2 - Prob. 10PSCh. 2 - Prob. 11PSCh. 2 - Present values What is the PV of 100 received in:...Ch. 2 - Prob. 13PSCh. 2 - Present values A factory costs 800,000. You reckon...Ch. 2 - Present values Recalculate the NPV of the office...Ch. 2 - Present values and opportunity cost of capital...Ch. 2 - Perpetuities An investment costs 1,548 and pays...Ch. 2 - Perpetuities You have just read an advertisement...Ch. 2 - Growing perpetuities A common stock will pay a...Ch. 2 - Prob. 20PSCh. 2 - Prob. 21PSCh. 2 - Annuities Kangaroo Autos is offering free credit...Ch. 2 - Annuities David and Helen Zhang are saving to buy...Ch. 2 - Prob. 24PSCh. 2 - Annuities Several years ago, The Wall Street...Ch. 2 - Prob. 26PSCh. 2 - Prob. 27PSCh. 2 - Prob. 28PSCh. 2 - Prob. 29PSCh. 2 - Annuities due A store offers two payment plans....Ch. 2 - Amortizing loans A bank loan requires you to pay...Ch. 2 - Amortizing loans Suppose that you take out a...Ch. 2 - Future values and annuities a. The cost of a new...Ch. 2 - Prob. 34PSCh. 2 - Growing annuities You are contemplating membership...Ch. 2 - Prob. 36PSCh. 2 - Growing perpetuities and annuities Your firms...Ch. 2 - Compounding intervals A leasing contract calls for...Ch. 2 - Compounding intervals Which would you prefer? a....Ch. 2 - Compounding intervals You are quoted an interest...Ch. 2 - Prob. 41PSCh. 2 - Continuous compounding How much will you have at...Ch. 2 - Continuous compounding The continuously compounded...Ch. 2 - Prob. 44PSCh. 2 - Annuities Use Excel to construct your own set of...Ch. 2 - Declining perpetuities and annuities You own an...
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