Determine the amount of annual year-end withdrawal

At the end of each year, all owners and employees at Bell County Utility Cooperative are given a bonus check based on the net profit of the Coop for the previous year. Bart just received his bonus in the amount of $8530. He plans to invest it in an annuity program that returns 7% per year. Bart’s long-term plans are to quit the Coop job some years in the future when he is still young enough to start his own business. Part of his future living expenses will be paid from the proceeds that this year’s bonus accumulates over his remaining years at the Coop.

(a)Use a spreadsheet to determine the amount of annual year-end withdrawal that he can anticipate (starting 1 year after he quits) that will continue forever. He is thinking of working 15 or 20 more years.

(b)Determine the amount Bart must accumulate after 15 and 20 years to generate $3000 per year forever.

Solution:

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