Mike needs to receive $40,000 per year left(at the beginning of each year) from his investments for the next 30 years. His opportunity cost of money is 5 percent. How much does he need in an account today to generate this level of income if he fully depletes the account?
Present value of annuity due=(1+rate)*Annuity[1-(1+interest rate)^-time period]/rate
=1.05*40,000[1-(1.05)^-30]/0.05
=40,000*16.1410736
=$645642.94(Approx).
Mike needs to receive $40,000 per year left(at the beginning of each year) from his investments...
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