Answer homework


Having Trouble Meeting Your Deadline?

Get your assignment on Answer homework  completed on time. avoid delay and – ORDER NOW

Chapter V.

Time value of money.

Sandra Gilbert, she’s 65 years old next year and she’s getting ready to retire. She worked at Wolfson Industries as an accountant and quality control engineer over the past 25 years and Sandra managed to raise $400,000 in her retirement account. Her husband died two years ago at the age of 70 and had no offspring. Jack Eloster from the Human Relations Department visited Sandra in anticipation of her retirement. Make it clear that there are a number of options you can make.

Four options:

1. The first option was to take a full $400,000 when she retired next year. She can then take the money and invest it herself. She’ll be in a 35 per cent tax chip and she’ll have to pay this rate at $400,000 before she can invest her money.

2. Sandra’s life expectancy is another 20 years, and you can receive an annual salary of $35,000 per year over the next 20 years. Considering that her annual income will be relatively small, a 15 per cent tax rate will be applied.

3. Seeing as it’s mostly over the age of males, one of the financial planning experts suggested that 90 would be the average life expectancy. That means she expects to live another 25 years. Under this scenario, Sandra can be expected to receive $31,000 a year and pay taxes at a rate of 15 per cent.

4. The fourth and final option would be to take half of the $400,000 initially and the balance Sandra gets in the form of annual equal payments over the next ten years. The tax rate for the initial payment will be 35 per cent and 15 per cent for subsequent payments.

There may be many other options for withdrawing $400,000, but Sandra preferred to consider these options for the time being.

Wanted: 1. Count the present value after deduction of the tax for option one. 2 .Assuming a discount rate of 8 per cent, the net present value of the tax benefits of option 2 is calculated. 3 .Again assuming a discount rate of 8 per cent, calculate the net present value of the tax benefits of option 3. 4 .What is the net present value of option 4 based on the established tax rates and 8% discount ratio? 5 .Which of the four options provides the highest current net value? 6. When comparing options 2 and 3, if a discount rate of 4 per cent is used instead of 8 per cent, will your answer change? Explain the reason for your conclusion.

Explanation & Answer

Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Order Now and we will direct you to our Order Page at Litessays. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.

Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.

Do you need an answer to this or any other questions?

Similar Posts