Trying to solve a problemWithdrawals per year =$50,000Number of years -25Amount required at...

Trying to solve a problem

Withdrawals per year =$50,000

Number of years -25

Amount required at the end of 20 years will be equal to the present value of all future withdrawls.

i.e. Amount = $50,000*PVAF(11%,25years)

= $50,000*8.422

= 421,100

Where or how do they get to 8.422. To multiply by the $50,000 I just can't figure that out?

Solutions

Expert Solution

The figure of 8.422 is present value annuity factor of 11% of 25 years which is computed as follows:

= [ (1 – 1 / (1 + r)ⁿ) / r ]

= [ (1 - 1 / (1 + 0.11)²⁵ ) / 0.11 ]

= (1 - 0.073608087) / 0.11

= 0.926391913 / 0.11

= 8.422 Approximately (Rounded to 3 decimal places)

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

What is the PV of $779 per year for 5 years if the required return is...

What is the PV of $779 per year for 5 years if the required return is 8.5% (assume the $779 payments come at the end of each of the next 5 years)? Answer to 2 decimal places.

$800 per year for 10 years at 10%. $ $400 per year for 5 years at...

$800 per year for 10 years at 10%. $ $400 per year for 5 years at 5%. $ $800 per year for 5 years at 0%. $ Now rework parts a, b, and c assuming that payments are made at the beginning of each year; that is, they are annuities due. Present value of $800 per year for 10 years at 10%: $ Present value of $400 per year for 5 years at 5%: $ Present value of $800 per...

An investment pays $2,050 per year for the first 3 years, $4,100 per year for the...

An investment pays $2,050 per year for the first 3 years, $4,100 per year for the next 3 years, and $6,150 per year the following 7 years (all payments are at the end of each year). If the discount rate is 8.75% compounding quarterly, what is the fair price of this investment?

An investment pays $2,050 per year for the first 3 years, $4,100 per year for the...

An investment pays $1,900 per year for the first 4 years, $3,800 per year for the...

An investment pays $1,900 per year for the first 4 years, $3,800 per year for the next 7 years, and $5,700 per year the following 12 years (all payments are at the end of each year). If the discount rate is 7.70% compounding quarterly, what is the fair price of this investment? Work with 4 decimal places and round your answer to two decimal places. For example, if your answer is $345.667 round as 345.67 and if your answer is...

Required: Solve these question in Microsoft Excel Five Years Ago Leslie Had $23460 In Her Saving...

Required: Solve these question in Microsoft Excel Five Years Ago Leslie Had $23460 In Her Saving Account Today She Deposited An Additional $6,000 She Plans To Deposit Another $6,000 Into This Account Next Year How Much Money Will She Have In Her Account Ten Years From Today If She Earns 7.5 Percent On Her Savings. One hundred years ago, your great grandfather purchased a 300-acre farm for the princely sum of $2500. Today,, that farm is still owned by your...

Ambrin Corp. expects to receive $9,000 per year for 14 years and $10,500 per year for...

Ambrin Corp. expects to receive $9,000 per year for 14 years and $10,500 per year for the next 14 years. What is the present value of this 28 year cash flow? Use an 11% discount rate. Use Appendix D and Appendix B. (Round "PV Factor" to 3 decimal places. Round your intermediate calculations to the nearest dollar value.)

Ambrin Corp. expects to receive $5000 per year for 10 years and $6500 per year for...

Ambrin Corp. expects to receive $5000 per year for 10 years and $6500 per year for the next 10 years. What is the present value of this 20 year cash flow? Use an 12% discount rate. Use Appendix D and Appendix B to calculate the answer. (Round your intermediate calculations to the nearest dollar value.) Options below: $40,076 $64,975 $48,550.5 none of these

You invest in a project that will pay you $500 per year for 5 years and then pays $750 per year for the following 10 years

You invest in a project that will pay you $500 per year for 5 years and then pays $750 per year for the following 10 years (assume that all payments are made at the end of the year). You require a 6% rate of return on this type of investment. Give your return requirement, what is the maximum amount that you would be willing to pay today for the cash flow stram associated with this project? Round only your final...

Use the ERR method with ? =%7 per year to solve a unique rate of return for...

Use the ERR method with ? =%7 per year to solve a unique rate of return for the following cash flow diagram. Year Cash Flow 0 -200 1 -140 2 +570 3 -830 4 +470 5 +320 6 -120

Subjects