More comfortable for your aging customer base

Assignment Help Financial Management

Reference no: EM131819204

You run a bike shop that rents touring bikes to tourists. You specialize in providing bikes that are more comfortable for your aging customer base (and these cush bikes aren’t cheap). Five years from now (at the end of the year), your whole fleet will need to be replaced – at $1500 a bike (and you’ll need 35). If you put $7,000 at the beginning of each year for the next 5 years into an account, and you will earn 5% interest on each $7,000 investment, will you be able to afford your new fleet (hint: what is the future value of your $7,000 investment? See p. 65 in Brayley & McLean for the formula)?

Your Excel file should depict the following (again, I must see the formulas when I click on the cells):

The amount that you will need in 4 years (F; which is cost of bikes x number of bikes you’ll need)

Interest rate (i)

Term (n, expressed in years)

TA (which you will find in Table B in Brayley & McLean p. 64) for each of the 4 years- note: this number will change each year as the number of years goes down!)

Present value (P; which is the amount of principal you will set aside each year)

The future value (F) of your $7,000 investment each year for 5 years.

Explanation- will you have enough? What specifically could you do to change that outcome?

Needs to be on an excel sheet

Reference no: EM131819204

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