MindTap Business Statistics for Ragsdale's Spreadsheet Modeling & Decision Analysis, 8th Edition, [Instant Access], 2 terms (12 months)
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Michelle, age 45, currently makes $95,000. Her wage replacement ratio is determined to be 75 percent. She expects that inflation will average 3 percent for her entire life expectancy. She expects to earn 8 percent on her investments and retire at age 65, possibly living to age 95. She has sent for and received her Social Security benefit statement, which indicated that her Social Security retirement benefit in today’s dollars adjusted for early retirement is $20,000 per year. How much capital does Jordan need to retire at age 65?.
ABC Corporation has recently given out a nine-month contract to a construction subcontractor. At the end of the first month, it becomes obvious that the subcontractor is not reporting costs according to an appropriate WBS level. ABC Corporation asks the subcontractor to change its cost reporting procedures. The subcontractor states that this cannot be done without additional funding. This problem has occurred with other subcontractors as well. What can ABC Corporation do about this?
A recent MBA graduate is considering an offer of employment at a biotech company, where she has been offered stock options as part of her compensation package. The options give her the right, but not the obligation, to buy 2500 shares of stock either one year from now or two years from now at a price of $50, which is the current market price of the stock. If the price of the stock has risen above $50 at either time, she can buy 2500 shares at $50 and then immediately sell at the current price, thereby making a risk-free profit. On the other hand, if the price of the stock has dropped below $50, she will not exercise the option because it is “out of the money” and she would loose money. Based on historical market information, she estimates that the stock price in the first year will either go up by 25% from its current price, with probability of 0.55, or it will go down by 15%, with probability of 0.45. In either case, she can exercise the options or wait to see what will happen in the…
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