please answer within 30 minutes. A 35-year-old businessman, his current salary is$100,000 and is increasing at 5% annually, and hehas a fortune of $1 million. His plan is to retire at theage of 55. This man is considering allocating$500,000 of his wealth for a project that takes him 5years, and therefore he will give up his currentsalary for five years in exchange for a new salary of$80,000 annually, which remains fixed during theproject implementation period.If the required rate of return on the investment forthis entrepreneur is 11%, it is required to calculatethe value of the entrepreneur's commitment to theproject.If the entrepreneur continues in the project for 5years and the project ends, and the entrepreneurdecides to return to his first job, he will receive asalary of $95,000 annually with a growth rate of 4%during the remaining 15 years of his career. Thecurrent value of the project's human capital isrequired to be calculated.What is the difference between the present value ofhuman capital if the entrepreneur decides to stay inthe job in exchange for a 5-year commitment to theproject?

With annuity (PMT), annual growth rate (g), period (n) and discount rate (r), the present value of…

A 35-year-old businessman, his current salary is $100,000 and is increasing at 5% annually, and he has a fortune of $1 million. His plan is to retire at the age of 55. This man is considering allocating $500.000 of his wealth for a project that takes him 5

A 35-year-old businessman, his current salary is $100,000 and is increasing at 5% annually, and he has a fortune of $1 million. His plan is to retire at the age of 55. This man is considering allocating $500.000 of his wealth for a project that takes him 5

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 6E

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Question

please answer within 30 minutes.

A 35-year-old businessman, his current salary is
$100,000 and is increasing at 5% annually, and he
has a fortune of $1 million. His plan is to retire at the
age of 55. This man is considering allocating
$500,000 of his wealth for a project that takes him 5
years, and therefore he will give up his current
salary for five years in exchange for a new salary of
$80,000 annually, which remains fixed during the
project implementation period.
If the required rate of return on the investment for
this entrepreneur is 11%, it is required to calculate
the value of the entrepreneur's commitment to the
project.
If the entrepreneur continues in the project for 5
years and the project ends, and the entrepreneur
decides to return to his first job, he will receive a
salary of $95,000 annually with a growth rate of 4%
during the remaining 15 years of his career. The
current value of the project's human capital is
required to be calculated.
What is the difference between the present value of
human capital if the entrepreneur decides to stay in
the job in exchange for a 5-year commitment to the
project?

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