Managerial Accounting
6th Edition
ISBN: 9781259726972
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter B, Problem 7QS
To determine
Present Value:
Present value of money means the present or current value of a future
Future Value:
The future value is the value of present cash flow at specified time period and at specified
We have to determine the value of the program on the date of last payment.
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John wishes to create his own life annuity plan. He expects to retire at
age 60. He plans to deposit a fixed amount of money in a retirement
account each year starting from age 30. Assume all amounts are
deposited or withdrawn at the end of the year. Suppose the account
can earn an annual rate of 5%.
1.
(a) If John wants to withdraw $120,000 each year starting from age 60
for the next 20 years, calculate the amount that should be
accumulated in the retirement account at age 60.
(7%)
(b) Calculate the fixed amount of money that John requires to deposit per
year for 30 years, starting from age 30 to accumulate the amount (8%)
calculated in part (a).
(c)
In the past 5 years, Industrial and Commercial Bank of China (ICBC)
has offered a stable dividend distribution of HK$0.26 per share each
year. What is the annual rate of return of this investment if you can (5%)
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are…
Using the Time Value of Money for Retirement Planning. Carla Lopez deposits $3,400 a year into her retirement account. If these funds have an average earning of 9 percent over the 40 years until her retirement, what will be the value of her retirement account?
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