Use the Information for the Question(s) Below

question 17

Multiple Choice

Use the information for the question(s) below.
Assume that you are 30 years old today, and that you are planning on retirement at age 65. Your current salary is $45,000 and you expect your salary to increase at a rate of 5% per year as long as you work. To save for your retirement, you plan on making annual contributions to a retirement account. Your first contribution will be made on your 31st birthday and will be 8% of this year's salary. Likewise, you expect to deposit 8% of your salary each year until you reach age 65. Assume that the rate of interest is 7%.
-Your son is about to start kindergarten in a private school.Currently,the tuition is $12,000 per year,payable at the start of the school year.You expect annual tuition increases to average 6% per year over the next 13 years.Assuming that your son remains in this private school through high school and that your current interest rate is 7%,then the present value of your son's private school education is closest to:

• A) $332,300
• B) $137,900
• C) $155,800
• D) $156,000

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Definitions:

Organization

A structured group of people with a specific purpose, such as a business, government agency, or charity.

Hierarchy

A system of organization where entities are ranked one above the other based on status or authority.

Span of Control

The number of subordinates that a manager or leader can effectively oversee, control, or manage.

Centralization

The organizational structure where decision-making authority is concentrated at the top levels of management and little autonomy is given to lower levels.