Purchase Solution

Budgeting and investments

Not what you're looking for?

Ask Custom Question

As part of your personal budgeting process you have determines that in each of the next 5 years you will have budget shortfalls. In other words, you will need the amounts shown in the following table at the end of the given year to balance your budget - that is, to make inflows equal outflows. You expect to earn 9% on your investments during the next 5 years and wish to fund the budget shortfalls over the next 5 years with a single amount. 7,000 4,000 8,000 10,000 13,000

A. How large must the single deposit today into an account paying 8% annual interest be provided for full coverage of the anticipated budget shortfalls?
B. What effect would an increase in your earnings rate have on the amount calculated in part a? Explain.

Attachments
Purchase this Solution
Solution Summary

This solution is comprised of a detailed explanation to answer how large must the single deposit today into an account paying 8% annual interest be provided for full coverage of the anticipated budget shortfalls and what effect would an increase in your earnings rate have on the amount calculated in part a.

Solution Preview

As part of your personal budgeting process, you have determined that in
each of the next 5 years you will have budget shortfalls. In other words,
you will need the amounts shown in the following table at the end of the
given year to balance your budget?that is, to make inflows equal outflows.
You expect to be able ...

Purchase this Solution
Free BrainMass Quizzes
MS Word 2010-Tricky Features

These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

IPOs

This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)

View More Free Quizzes
Related BrainMass Solutions

  • Capital budgeting decisions

    Through this process potential investments are identified and the investments to undertake are selected. It is the process by which the firm decides which long-term investments to make.

  • Accounting - Capital Budgeting

    500758 Accounting - Capital Budgeting A principle difference between operational budgeting and capital budgeting is the time frame of the budget.

  • Explanation for Capital Budgeting

    A firm utilizes capital budgeting to make investments decisions and this decisions are aimed at increasing shareholders' wealth and thus capital budgeting is critical for business success.

  • Land owned by a firm is irrelevant to a capital budgeting decision as it is a sunk cost

    Capital Budgeting is the process by which the firm decides which long-term investments to make. Capital Budgeting projects, i.e., potential long-term investments, are expected to generate cash flows over several years.

  • The Capital Budgeting Process

    Capital budgeting is an innovative and necessary process by which organizational planners analyze an organizations proposed long-term investments, and use mathematical analytical techniques in order to make the determination as to whether these long-term

  • Capital Rationing Model

    This can be done through providing services and products or through investments. However, how an organization determines which investments are the right ones is very important. One method of doing this is capital budgeting.

  • IRR, MIRR, and Discounted Cashflow

    As per Zen Wealth, "Capital Budgeting is the process by which the firm decides which long-term investments to make. Capital Budgeting projects, i.e., potential long-term investments, are expected to generate cash flows over several years.

  • Benefit cost ratio for each alternative

    As per Zen Wealth, "Capital Budgeting is the process by which the firm decides which long-term investments to make. Capital Budgeting projects, i.e., potential long-term investments, are expected to generate cash flows over several years.

  • Project Acceptance Citeria

    The decision to accept or reject a Capital Budgeting project depends on an analysis of the cash flows generated by the project and its cost.

  • Capital Budgeting

    As part of the financial plan, the Capital Budgeting ensures that the right investments are pursued to meet the goals. Capital Budgeting, and how it is utilized are explained.

View More Related Solutions