Then answer the following questions:

1. At age 60, you find that your employer is moving to another location. You receive termination pay of $600,000. You have some savings and wonder whether to retire now.

a. If you invest the $600,000 now at 8%, compounded annually, how much money can you withdraw from your account each year so at the end of 5 years there will be a zero balance?

b. If you invest the $600,000 now at 10%, compounded annually, how much money can you withdraw from your account each year so at the end of 5 years there will be a zero balance?

2. At 16%, compounded annually, which of the following plans is more desirable in terms of present value? Show computations to support your answer.

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Annual Cash Inflows Year Mining Farming 1 $100,000 20,000 2 3 4 5 80,000 60,000 40,000 40,000 60,000 80,000 $300,000 $300,000