QUESTION #2

Today, the renovation of Donald's restaurant has been completed. Donald calculates that the

renovation and other related expenses total $24,000 on the completion date (i.e. today). He believes

that the renovation will bring in additional profit for his restaurant.

Donald plans to sell his restaurant after 6 years. He would like to see an effective annual return of

24.5% on his investment (i.e. the renovation).

a) What is the minimum additional level weekly profit (paid at the end of each week) that would need

to be generated over the next 6 years for Donald to achieve his return of 24.5%? For the purposes of

this part only, assume there are no other additional profits resulting from the renovation. (1 mark)

b) After further consideration, Donald believes that the renovation would also allow him to sell his

restaurant for an additional $30,000 in 6 years' time. What is the new minimum additional level

weekly profit that would need to be generated over the next 6 years for Donald to achieve his return

of 24.5%? (1 mark)