View Full Version : Business Finance Question
kowens3
Oct 29, 2006, 10:22 AM
You are 40 years old and plan to retire in exactly 20 years. Starting 21 years from now you will need to with draw $5,000 per year from your retirement fund to supplement your social security payment. If you expect to live to age eighty-five how much should you place in the retirement fund each year for the next 20 years to reach your retirement goal, assuming you can earn 12% per year on your retirement fund investment? Please Show formulas and input so that I can understand.
RichardBondMan
Oct 30, 2006, 09:17 PM
Taken from TIAA CREF.org website (Teacher's Insurance & Annuity Assoc, College Retirement Equities Fund),
Compute how much you'll need to save to reach a future income goal. The income calculation assumes systematic withdrawals that exhaust your principal and accrued earnings over the specified payout period. If you want a lump-sum amount rather than income over time, enter 1 in the Duration field.
Annual income goal in constant (i.e. inflation-adjusted) dollars $
Years to save
Duration (for how many years do you need income?)
Initial investment $
Assumed annual investment return* %
Inflation rate %
Average annual contribution increase, if any %
You need to invest or save $ 98,539
... once a month: $ 107
... or once a year: $ 1,284
... or more as an initial investment: $ 10,215
All calculations assume beginning of the month investment. The result shown does not reflect returns from an actual investment.
* If not held in a tax-deferred plan, use after-tax rate of return.
Jacdesha
Aug 4, 2007, 03:37 PM
The following tabulation gives earnings per share figures for the Foust Company during the
Preceding 10 years. The firm’s common stock, 7.8 million shares outstanding, is now (1/1/03)
Selling for $65 per share, and the expected dividend at the end of the current year (2003) is
55 percent of the 2002 EPS. Because investors expect past trends to continue, g may be based
On the earnings growth rate. (Note that 9 years of growth are reflected in the data.)
YEAR EPS YEAR EPS
1993 $3.90 1998 $5.73
1994 4.21 1999 6.19
1995 4.55 2000 6.68
1996 4.91 2001 7.22
1997 5.31 2002 7.80
The current interest rate on new debt is 9 percent. The firm’s marginal tax rate is 40 percent.
Its capital structure, considered to be optimal, is as follows:
Debt $104,000,000
Common equity 156,000,000
Total liabilities and equity $260,000,000
a. Calculate Foust’s after-tax cost of new debt and common equity. Calculate the cost of equity
As ks D1/P0 g.
b. Find Foust’s weighted average cost of capital.
hakimah
Jul 18, 2012, 09:59 PM
mary will receive 12,000 per year for the next 10 years as royalty for her work on a finance book. What is the present value of her royalty income if the opportunity cost is 12 percent?