(Comprehensive problem) Over the past few years, Microsoft founder Bill Gates' net worth has fluctuated between...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
(Comprehensive problem) Over the past few years, Microsoft founder Bill Gates' net worth has fluctuated between $20 billion and $130 billion. In early 2006, it was about $26 billion-after he reduced his stake in Microsoft from 21 percent to around 14 percent by moving billions into his charitable foundation. Let's see what Bill Gates can do with his money in the following problems. a. Manhattan's native tribe sold Manhattan Island to Peter Minuit for $24 in 1626. Now, 387 years later in 2013, Bill Gates wants to buy the island from the "current natives." How much would Bill have to pay for Manhattan if the "current natives" want a 5 percent annual return on the original $24 purchase price? b. Bill Gates decides to pass on Manhattan and instead plans to buy the city of Seattle, Washington, for $50 billion in 9 years. How much would Bill have to invest today at 9 percent compounded annually in order to purchase Seattle in 9 years? c. Now assume Bill Gates only wants to invest half his net worth today, $13 billion, in order to buy Seattle for $50 billion in 9 years. What annual rate of return would he have to earn in order to complete his purchase in 9 years? d. Instead of buying and running large cities, Bill Gates is considering quitting the rigors of the business world and retiring to work on his golf game. To fund his retirement, Bill would invest his $20 billion fortune in safe investments with an expected annual rate of return of 6 percent. He also wants to make 45 equal annual withdrawals from this retirement fund beginning a year from today, running his retirement fund to $0 at the end of 45 years. How much can his annual withdrawal be in this case? (Comprehensive problem) Over the past few years, Microsoft founder Bill Gates' net worth has fluctuated between $20 billion and $130 billion. In early 2006, it was about $26 billion-after he reduced his stake in Microsoft from 21 percent to around 14 percent by moving billions into his charitable foundation. Let's see what Bill Gates can do with his money in the following problems. a. Manhattan's native tribe sold Manhattan Island to Peter Minuit for $24 in 1626. Now, 387 years later in 2013, Bill Gates wants to buy the island from the "current natives." How much would Bill have to pay for Manhattan if the "current natives" want a 5 percent annual return on the original $24 purchase price? b. Bill Gates decides to pass on Manhattan and instead plans to buy the city of Seattle, Washington, for $50 billion in 9 years. How much would Bill have to invest today at 9 percent compounded annually in order to purchase Seattle in 9 years? c. Now assume Bill Gates only wants to invest half his net worth today, $13 billion, in order to buy Seattle for $50 billion in 9 years. What annual rate of return would he have to earn in order to complete his purchase in 9 years? d. Instead of buying and running large cities, Bill Gates is considering quitting the rigors of the business world and retiring to work on his golf game. To fund his retirement, Bill would invest his $20 billion fortune in safe investments with an expected annual rate of return of 6 percent. He also wants to make 45 equal annual withdrawals from this retirement fund beginning a year from today, running his retirement fund to $0 at the end of 45 years. How much can his annual withdrawal be in this case?
Expert Answer:
Posted Date:
Students also viewed these finance questions
-
If = f() but the iteration x n+1 = f (x n ) fails to converge to the root a, under what condition on f(x) will the iteration x n+1 = f 1 (x n ) converge?
-
Suppose that the inner cylinder of Figure is made of nonconducting material and carries a volume charge distribution given by ?(r) = C/r, where C = 200 nC/m2. The outer cylinder is metallic. (a) Find...
-
Apply the power method (3 steps) with scaling, using x 0 = [1 1 1] T or [1 1 1 1] T , as applicable. Give Rayleigh quotients and error bounds. Show the details of your work. 4 2 3 2 3 4 7,
-
What type of company is typically characterized by a high dividend payout ratio? a. Technology company b. High-growth company c. Mature, low-growth company d. All of the above
-
Design and plot a critical ratio for a computer installation project that had planned constant, linear progress from 0 to an earned value of 200 over a 100-day duration. In fact, progress for the...
-
Calculate the total annual interest, total cost, and current yield for the bond. Note: Round the "Current yield" to the nearest tenth percent and other answers to the nearest whole dollar. Bond Wang...
-
What is: ( a ) a basic Wiener process? ( b ) the difference between a basic Wiener process and a generalised Wiener process? ( c ) What is an Ito process? Why is an Ito process more applicable to...
-
A manufacturing company is considering acquiring a stamping press. The plan calls for using the machine in a three-shift operation at a production rate of 100 parts per minute. Past experience has...
-
Questions 24 to 26 are based on the following flexible budget of factory overhead for Ritz Company: Percentage of Normal Capacity Variable Overhead 90% 216,000 240,000 264,000 120,000 120,000 120,000...
-
The influencer race is taking over the pet kingdom. Accounts for animals now often outperform verified humans on Instagram. Please review the clip and respond to the questions. Issues to Discuss: 1)...
-
A drive sprocket has 24 teeth and rotates at 20 pm. The driven sprocket has only 12 teeth. How many revolutions will the driven sprocket make per minute
-
Laila made the following property transfers. Payment to MSU for 15,000 daughter's tuition Payment to MSU for 12,000 daughter's room & board Donation to local Fire 1,000 Dept Payment to the doctor for...
-
39. The critical angle of glass is 41. Which of the following will result in total internal reflection? a) 44 b) 40 c) 38 d) 20.5 40. Myopia is: a) A clouding of the lens b) Farsightedness c)...
-
1. What are some current issues facing Saudi Arabia? What is the climate for doing business in Saudi Arabia today? 2. Is it legal for Auger's firm to make a payment of $100,000 to help ensure this...
-
Santiago, Inc., began operations as an importer of fine Chilean wine the United States. Sales and purchase information is provided below. Santiago, Inc., uses the LIFO method of inventory valuation....
-
Presented below are the financial statements of two companies that are identical in every respect except the method of valuing their inventories. The method of valuing inventory is LIFO for the LIFO...
-
Costco Wholesale Corporation operates membership warehouses. As of August 30, 2015 Costco operated 686 warehouses, with 480 in the United States. In addition, the store sells merchandise through its...
Study smarter with the SolutionInn App