CASE STUDY DONE USING EXCEL MUST SHOW CALCULATIONS AND SOLUTION
Instructions Please complete the following: Carry all calculations to TWO decimal places to reduce rounding error, especially in multi-step problems. Remember to show all calculations. You must show your calculations. If you do not show how you arrived at your answers, you will not receive credit. Merely showing the formula without the calculations is not sufficient. The problems should be set up in columns or using other appropriate formats—do not hide all steps in formulas behind one answer. I must still be able to see how you arrived at the answer—without my needing to do a lot of "investigative work." CASE STUDY Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research, Jill Moran. Ms. Moran, by contract, will retire at the end of exactly 12 years. Upon retirement, she is entitled to receive an annual end-of-year payment of $42,000 for exactly 20 years. If she dies prior to the end of the 20-year period, the annual payments will pass to her heirs. During the 12-year “accumulation period,” Sunrise wishes to fund the annuity by making equal, annual, end-of-year deposits into an account earning 9% interest. Once the 20-year “distribution period” begins, Sunrise plans to move the accumulated monies to an account earning a guaranteed 12% per year. At the end of the distribution period, the account balance will equal zero. Note that the first deposit will be made at the end of year 1 and that first distribution payment will be received at the end of year 13. Case Study Questions: 1. How large a sum must Sunrise accumulate by the end of year 12 to provide the 20-year, $42,000 annuity? 2. How large must Sunrise’s equal, annual, end-of-year deposits into the account be over the 12-year accumulation period to fund fully Ms. Moran’s retirement annuity? 3. How much would Sunrise have to deposit annually during the accumulation period if it could earn 10% rather than 9% during the accumulation period? 4. How much would Sunrise have to deposit annually during the accumulation period if Ms. Moran’s retirement annuity were a perpetuity and all other terms were the same as initially described? Instructions Please complete the following: Carry all calculations to TWO decimal places to reduce rounding error, especially in multi-step problems. Remember to show all calculations. You must show your calculations. If you do not show how you arrived at your answers, you will not receive credit. Merely showing the formula without the calculations is not sufficient. The problems should be set up in columns or using other appropriate formats—do not hide all steps in formulas behind one answer. I must still be able to see how you arrived at the answer—without my needing to do a lot of "investigative work." CASE STUDY Sunrise Industries wishes to accumulate funds to provide a retirement annuity for its vice president of research, Jill Moran. Ms. Moran, by contract, will retire at the end of exactly 12 years. Upon retirement, she is entitled to receive an annual end-of-year payment of $42,000 for exactly 20 years. If she dies prior to the end of the 20-year period, the annual payments will pass to her heirs. During the 12-year “accumulation period,” Sunrise wishes to fund the annuity by making equal, annual, end-of-year deposits into an account earning 9% interest. Once the 20-year “distribution period” begins, Sunrise plans to move the accumulated monies to an account earning a guaranteed 12% per year. At the end of the distribution period, the account balance will equal zero. Note that the first deposit will be made at the end of year 1 and that first distribution payment will be received at the end of year 13. Case Study Questions: 1. How large a sum must Sunrise accumulate by the end of year 12 to provide the 20-year, $42,000 annuity? 2. How large must Sunrise’s equal, annual, end-of-year deposits into the account be over the 12-year accumulation period to fund fully Ms. Moran’s retirement annuity? 3. How much would Sunrise have to deposit annually during the accumulation period if it could earn 10% rather than 9% during the accumulation period? 4. How much would Sunrise have to deposit annually during the accumulation period if Ms. Moran’s retirement annuity were a perpetuity and all other terms were the same as initially described?