Corporate Finance LBS exam Cheat Sheet (DRAFT) by cchuffart

M is 30 and salary next year $40,000. M forecasts salary will increase by 5% per year until age 60 a)If the discount rate is 8 percent, what is the PV of these future salary paymen­ts?PV= 40,000­/(.0­8-0.5) (1-(1+.05­/1+.08)^{30) = 76,662.5 b)If M saves 5 percent each year and invests at 8%, saving by age 60?PV(­salary) x 0.05 = $38,033.13 Future value = $38,033.13 x (1.08)}30 = $382,7­14.30 c)M plans to spend in even amounts over the 20 y, how much spend each year? 382,714.30 = C/.08(­(1-­(1/­1+.0­8)^20) => c= 38,980.73