CH 12 Capital Budgeting

CH 12 Capital Budgeting - CH 12 Capital Budgeting...

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CH 12 Capital Budgeting Wednesday, March 30, 2011 9:39 AM 1. Future value = present value (1 + r) n , r = interest rate 100,000 (1.08) 12 = $100,000 deposit, 8% interest rate, for 12 years = $251,817 1. Future Value of an Annuity = FVA = Period Rent{ [(1 +r) n - 1]/r} You deposit $5,000 into an ROTH IRA on your 21st birfday and on every birfday. your last deposit will be on your 65th birfday. [45 deposits in total] Assuming r = 10%, what will your money be worth on your 65th birfday! 5000 { [(1 +.1) 45 - 1]/.1} = $3,594,524 1. PV = FV (1/1+r) n Your wedding will be 3/30/14, you need $100,000 You earn 9% on your funds How much will you need to deposit today to have $100,000 in three years? 100,000 (1/1.09) 3 = $77,128 needed today 1. PVA = PR [(1 - (1/1+r) n )/r] At age 65, you have $3,500,000 in your retirement fund. You can earn 8%. You plan to live 20 more years. How much could you withdraw on your 66th birfday and on each of your next 19 birfdays? 20 total withdrawals
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CH 12 Capital Budgeting - CH 12 Capital Budgeting...

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