Question

You are planning to retire in 17 years and figure you will need $2 million in your 401K. Your current balance is $300,000 and you plan to make 17 annual contributions of equal size over the next 17 years beginning one year from today. How much does the size of your payment need to be to meet your goals if you expect your 401K to earn 7% per year?

Group of answer choices

a. $29,001.42

b. $39,958.00

c. None of the above

d. $34,122.83

Which of the following statements is CORRECT?

Group of answer choices

a. One defect of the IRR method is that it does not take account of the time value of money.

b. One defect of the IRR method is that it does not take account of cash flows over a project’s full life.

c. One defect of the IRR method is that it does not take account of the cost of capital.

d. One defect of the IRR method is that it assumes that the cash flows to be received from a project can be reinvested at the IRR itself, and that assumption is often not valid.

e. One defect of the IRR method is that it values a dollar received today the same as a dollar that will not be received until sometime in the future.

Answer #1

1.

FV = $2,000,000

PV = $300,000

Nper = 17

Rate = 7%

Amount of annual contribution can be calculated by using the
following excel formula:

=PMT(rate,nper,pv,fv)

=PMT(7%,17,-300000,2000000)

= $34,122.83

**Amount of annual contribution = $34,122.83**

2.

**One defect of the IRR method is that it assumes that the
cash flows to be received from a project can be reinvested at the
IRR itself, and that assumption is often not valid.**

IRR is the rate at which NPV is zero. The correct answer is option D. Other given options are wrong.

Which of the following statements is CORRECT?
A) One defect of the IRR method is that it does not take account of
cash flows over a project’s full life.
B) One defect of the IRR method is that it does not take account of
the time value of money.
C) One defect of the IRR method is that it does not take account of
the cost of capital.
D) One defect of the IRR method is that it values a...

Which of the following statements is NOT
CORRECT?
a.
The IRR method takes into account the time value of money
b.
The IRR method values a dollar received today greater than a
dollar that will be received until sometime in the future
c.
The IRR method takes into account the cash flows over a
project’s full life
d.
The IRR method assumes that the cash flows to be received from a
project are to be reinvested at the WACC

1. Which of the following statements is CORRECT?
A. One problem of the IRR method is that it does not consider
all cash flows of a project.
B. One problem of the IRR method is that it does not take into
account the time value of money.
C. One problem of the IRR method is that it does not consider
the reinvestment of cash inflows.
D. One problem of the IRR method is that a dollar received today
is valued...

1. Multiple internal rates or return occur when:
Select one:
A. The project’s cash flows are larger earlier in the life of
the project.
B. The project’s cash flows are larger later in the life of the
project.
C. When the project’s cash flows experience normal cash flow
streams (i.e. one sign change).
D. When the project’s cash flows experience non-normal cash flow
streams (i.e. two or more sign changes).
E. When the IRR is equal to the WACC.
2....

Suppose you are evaluating a project with the cash inflows shown
in the following table. Your boss has asked you to calculate the
project’s net present value (NPV). You don’t know the project’s
initial cost, but you do know the project’s regular, or
conventional, payback period is 2.50 years.
The project's annual cash flows are:
Year
Cash Flow
Year 1
$375,000
Year 2
550,000
Year 3
400,000
Year 4
300,000
If the project’s desired rate of return is 9.00%, the...

The NPV and payback period
Suppose you are evaluating a project with the cash inflows shown
in the following table. Your boss has asked you to calculate the
project’s net present value (NPV). You don’t know the project’s
initial cost, but you do know the project’s regular, or
conventional, payback period is 2.50 years.
The project's annual cash flows are:
Year
Cash Flow
Year 1
$400,000
Year 2
600,000
Year 3
500,000
Year 4
475,000
If the project’s desired rate...

7. The NPV and payback period
Suppose you are evaluating a project with the cash inflows shown
in the following table. Your boss has asked you to calculate the
project’s net present value (NPV). You don’t know the project’s
initial cost, but you do know the project’s regular, or
conventional, payback period is 2.50 years.
The project's annual cash flows are:
Year
Cash Flow
Year 1
$350,000
Year 2
600,000
Year 3
600,000
Year 4
450,000
If the project’s desired...

suppose you wish to retire forty years from today. you determine
that you need $50,000 per year, with the first retirement amount
withdrawn after one year from the day you retire. assume a nominal
interest of 6% compounded quarterly and that you will need the
retirement amount for 25 years after retirement. draw the cash flow
and calculate how much you must deposit each quarter in your
account starting one quarter from today until retirement.

You know you will need $25,000 at the end of 5 years. How much
would you have to deposit annually, starting at the end of the
first year, into an account earning 10% to accumulate the needed
amount?
Group of answer choices
$3,980
$4,095
$4,435
$4,973
$5,886
17.
What is the amount of the equal annual installments for a
10-year, $10,000 loan with a 20% rate of interest?
Group of answer choices
$2,225
$3,863
$2,385
$1,917
$2,000
18.
What amount...

You anticipate that you will need $1,500,000 when you retire 30
years from now. You just join a new firm and your first annual
salary is $100,000 to be received one year from today. You also
received one time signing bonus of $50,000 today. You decided that
you will put all you signing bonus into your account plus you will
contribute $X every year starting next year for the next 29 years.
In other words, after your initial deposit of...

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