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James & Mary Watson own a small chain of McDonalds restaurants valued at $2,300,000. They believe that the chain will grow in value at 12%
James & Mary Watson own a small chain of McDonalds restaurants valued at $2,300,000. They believe that the chain will grow in value at 12% per year compounded annually for the next 5 years. If they sell the chain, the funds will be invested at a rate of 6% compounded semiannually. Ignore taxes, and answer the following questions, rounding to the nearest dollar at each step.
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- Find the future value of the chain after 5 years.
- Find the price they should sell the chain for if they will to have the same future value at the end of 5 years.
- Find the future value of the chain if it grows at only 2% per year for 5 years.
- Find the price they should ask for the chain given a 2% growth rate per year.
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