Arvin Marlacher is 25 years old today. Marlacher wants to be prepared for his retirement,and so is doing his planning early. He has already saved $20,000 toward retirement.Marlacher plans to save $5,000 per year at the end of each of the next 15 years, $7,000 peryear at the end of each of the following 15 years, and $8,000 per year for the following 5years. Marlacher plans to retire on his 60th birthday. On the day he retires, he plans tospend $200,000 of the money he has accumulated to purchase a house. Marlacher will live25 years beyond retirement. He wishes to have a contingency fund of $100,000 available(in addition to his home) at the time of his death to pay for funeral and other expenses thatmay arise in relation to his death. How much money can Marrlacher withdraw at thebeginning of each year of retirement and still meet his other goals? Each of the withdrawalswill be for an equal amount. Assume a 10 percent nominal interest rate compoundedannually throughout the entire problem. Show your calculations. INTERPRET YOUR FINALANSWER.

The question is based on the concept of Financial Management.Arvin has $ 20,000 for retirement right now. Arvin will invest $ 5,000 for next 15 years and then $ 7,000 for next 15 years and then $ 8,000 for next 5 years. Total time to retirement is 35 years. Life to live after retirement is 25 years. Arvin will use $ 200,000 for house purchase and $ 100,000 for contingency. So total $ 300,000 from fund accumulated for retirement. Rate of interest is 10%. Now here to calculated accumulated fund for retirement we will use excel function such as PMT, FV. Calculation of fund accumulated at retirement. Value of $ 20,000 aftet 35 years, FV = PV * ( 1+ r)^n FV= future value PV= present value r = interest rate n =time FV = $ 20,000 * (1+10%)^35 = $ 562,048.74 So the value of $ 20,000 after 35 years at 10% is $ 562,048.74. Now value of $ 5,000 contribution at the end of each year for next 15 years, Here we will use excel function FV, FV The functions arguments: Rate: In this write interest rate. Nper: In this write total time of investment pmt: In this write yearly contribution Type: "0" for contribution made at end of the year and "1" contribution made at beginning of year So the value of this contribution after 15 years is $ 158,862.41 Now this will at 10% for next 20 years, so, value after 20 years is, = $ 158,862.41 * (1+10%)^20 = $ 1,068,746.84 Now value of yearly contribution of $ 7,000 for next 15 years, So the value of this contribution after 15 years is $ 222,407.37 Now this will at 10% for next 5 years, so, value after 5 years is, = $ 222,407.37 * (1+10%)^5 = $ 358,189.30 Now value of yearly contribution of $ 8,000 for next 5 years, So the value of this contribution after 5 years is $ 48,840.80 Now total value of all these contribution is, So the total fund accumulated for retirement is $ 2,037,825.68 Now from this $ 300,000 is used, So available balance is, $ 2,037,825.68 - $ 300,000 = 1,737,825.68 Now to calculate yearly cash flow at the beginning we will use excel function PMT, PMT In this all arguments are same: only in Pv we write balance amount So the yearly cash flow at beginning is $ 174,048.10 So the yearly cash flow at beginning is $ 174,048.10