PFIN 5th Edition by Randall Billingsley,Lawrence Gitman,Michael Joehnk

Exercise 8

Calculate amount to invest to meet objectives. Use Worksheet 11.1. Stacey starkey is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, what she would really like to do is open a bookstore of her own. She would like to open her store in about eight years and figures she'll need about $50,000 in capital to do so. Given that stacey thinks she can make about 10 percent on her money, use Worksheet 11.1 to answer the following questions.
a. How much would Stacey have to invest today, in one lump sum, to end up with $50,000 in eight years?
b. If she's starting from scratch, how much would she have to put away annually to accumulate the needed capital in eight years?
c. If she already has $10,000 socked away, how much would she have to put away annually to accumulate the required capital in eight years?
d. Given that Stacey has an idea of how much she needs to save, explain how she could use an investment plan to help reach her objective.