Question

9: Assuming Therese expects to live to age 90 (so needs 30 years of payouts), and has shifted to a lowerrisk (and lower-yield) investment yielding 5%, what annual payout can she expect from age 61-90? (Assume she leaves her heirs with $0 in the account, and shuffles off this mortal coil at age 90, after receiving the last payment).

10: Compare 2 machines. Machine “A” costs $22,000, reduces utility expense by $400/month, and has a salvage value of $3200. Machine “B” costs $25,000, reduces utility expense by $475/month, and has a salvage value of $3000.

Use a 6% NOMINAL ANNUAL discount rate, and analyze over 5 years. Which machine do you recommend? (Neglect taxes and depreciation.)

Answer 1

Answer:

The solution is given below in the fig.