15. You are a financial advisor. Your client wishes to retire in 25 years with $

Question

15. You are a financial advisor. Your client wishes to retire in 25 years with $2.8 miltion saved. You have an investment that returns 6.55% annualy guaranteed. How much shon d your clent deposit into this account month for 2svears to reach S2 8 milion?(Assume monthly compounding) aoCy at the end of each . 16. What is the future value of $1,750rested every year for the next 18 years at 7.3%? Mar 2 cial advisor. Yo r., that returns 6,25% annually guaranteed. How much should 1ou area financial advisor. Your client wishes to retire in 30 years with Sa Pv=_ that returns FV3. years with Sa93 ually guaranteed. How much should your client deposit into this account at the end of each pysFyyear for 30years to reachsam nono (Assume annual (Assume annual compounding: show all work) 18. You want to purchase a car in 5ysars for $32.000, How mych must you invest today at 7.33.in order to purchase the a car in 5 years for $32 car in 5 years? (show all work)P years? show all work 32.00 PV = 22, 96.38 19. What are the 3 financial problems that cause firms to fail? 20. You own a smal restayrant that you started with $185,000 of your own money. You purchased furniture and equipment totaling $105,000 with a useful life of 5 xears. In your first year, you had Revenue of $360,000 and expenses of $220.000 including casts ot goods sold and depreciation.expense Answer the following Provide details on your purchase of the equipment and furniture, le. did you use cash or purchase on a note? What is your Common Stock (listed under Owner's Equity) for year 1? What is Depreciation Expense for year 1? What is Net Income for Year 1? What is Retained Earnings at the end of Year 1? . . . . . What is total Owners' Equity at the end of Year 1? At the beginning of Year 2, you decide to expand your business from question #18. Provide 3 examples of investment decisions you may consider as well as 3 finance decisions you may consider (See #6 and #7). Please include dollar amounts.

Explanation / Answer

15. FV=PMT/ i [(1+i)^n1]

FV = Future Value = $2,800,000 n = Number of Months = 25 x 12 = 300, i = Interest Rate = 6.55 / 12 = 0.5458%

2,800,000= PMT / 0.005458 [(1 + 0.005458)^300 - 1] = $3,710

So, the monthly payment is $3,710

16. FV=PMT/ i [(1+i)^n1]

FV = Future Value = ? PMT = 1,750 n = Number of Years = 18, i = Interest Rate = 7.3%

FV = 1,750 / 0.073 [(1 + 0.073)^18 - 1] = $61,241.25

(It is assumed that payment is made at the end of every year)

18. Present Value = Future Value / (1+r)^n

r = Rate of interest = 7.3%, n = Number of Years = 5 Years, Future Value = 32,000

PV= 32,000 / (1 + 0.073)^5 = $22,498.39

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