Find the future value of the chain after five years

Assignment Help Financial Management

Reference no: EM131327108

James and Mary Watson own a small chain of McDonald's Resturants that is valued at $2,300,000. They believe that the chain will grow in value 12% per year compounded annually for the next 5 years. If they sell the chain, the funds will be invested for 5 years at a rate of 6% compounded semiannually.They expect inflation to be 4% per year for the next 5 years. Ignore taxes and answer the following. Round answers to the nearest dollar.

(a) Find the future value of the chain after 5 years. Then find the price they should sell the chain for if they wish to have the same future value at the end of 5 years.

(b) Find the future value of the chain if it only grows at 2% per year for 5 years. Then find the price they should ask for the chain given a 2% growth rate per year.

(c) What future value would the chain be worth if it grew at their epected rate of inflation? Find the price they should ask for the chain if it grows at the rate of inflation.

(d) Complete table

Growth Rate Future Value Value Today

2% ___________ __________

4%(inflation) ___________ ___________

12% ____________ ____________

Reference no: EM131327108

Questions Cloud

Discuss how the issue has been addressed historically : Discuss how the issue has been addressed historically. Determine the courses of action taken in science, technology, political and economic systems, laws and regulations, community-based initiatives, education, and so forth.

Develop a pro forma statement for the betts property : Develop a pro forma statement for the Betts property for a base year showing net operating income (NOI).- If you plan to begin work on future pro formas for Betts, list at least five major factors that you would consider.

What is the erosion effect on the sale of motor homes : Winnebagel Corp. currently sells motor homes at $73,000 each. The company wants to introduce a new portable camper to fill out its product line; it hopes to sell 25,000 of these campers per year at $19,000 each. What is the erosion effect on the sale..

Discuss the hazards posed by the interaction of hazardous : BOS 3640- Discuss the hazards posed by the interaction of the hazardous materials present at the refinery and adjacent facilities, including the resulting by-products of the incident fire and acid gas release.

Find the future value of the chain after five years : James and Mary Watson own a small chain of McDonald's Resturants that is valued at $2,300,000. They believe that the chain will grow in value 12% per year compounded annually for the next 5 years. Find the future value of the chain after 5 years. The..

What is your annualized? return : Assume you buy a share of stock at ?$29?, it pays ?$1.97 in? dividends, and you sell it 237 days later for ?$22. What is your annualized? return? Enter a negative percentage for a loss and assume a? 365-day year.

Describe the specific ecosystem that you have selected : Describe the specific ecosystem that you have selected by doing the following: Identify the specific geographic location of the ecosystem

List at least five major factors that you would consider : If you plan to begin work on future pro formas for West Office Plaza, list at least five major factors that you would consider.

Analyze the aspect of human culture you selected for each : Identify two to three societies to compare, such as an African society , Indian, Chinese, Korean, or one of the many Native American groups .Describe the background information of each of the societies you have chosen. You need not analyze this bac..

User Account

All Pages