Can anyone please explain how have they arrived at the answer of 2.43 million. I am unable to figure it out?
You need to discount 500 000 in year 1, 500 000 (1.02) in year 2 etc. and divide by the prob adjusted discount rate of 2.3%.
@cfageist hey thanks this means that I can use inflation adjusted returns to calculate the answer.
However, when I am calculating the same for part 2 where it states that Smith’s require to maintain purchasing power for ensuing 25 years at a discount rate of 6.1%. I am not getting the answer of 6.25 mn