Contemporary Financial Management, Loose-leaf Version
Contemporary Financial Management, Loose-leaf Version
14th Edition
ISBN: 9781337090636
Author: R. Charles Moyer, James R. McGuigan, Ramesh P. Rao
Publisher: South-Western College Pub
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Chapter 5, Problem 37P
Summary Introduction

To determine: Amount saved by person X at the end of next six years.

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Cyrus Petit is planning for the day when his child Laura, will go to college. Laura has just turned 8 and plans to enter college on her eighteenth birthday. She will need $40,000 at the beginning of each year of college. Cyrus plans to give Laura a Lexus-IS as a combination graduation and twenty-second birthday present. The Lexus is expected to cost $50,000. Cyrus currently has $20,000 saved for Laura. Also, Cyrus expects to inherit $25,000 nine years from now that will be used for Laura's education. Cyrus expects to be able to earn 5 percent after-tax on any investments. Set the problem up with the aid of a time line showing each of the periods and how the cash flows are distributed. How much must Cyrus save at the end of each of the next 9 years in order to provide for Laura's education and the Lexus?
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