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James & Mary Watson own a small chain of McDonald’s restaurants valued at $2,300,000. They believe...

James & Mary Watson own a small chain of McDonald’s 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.

Show all your work for full credit.

  1. Find the future value of the chain after 5 years.
  2. Find the price they should sell the chain for if they will to have the same future value at the end of 5 years.
  3. Find the future value of the chain if it grows at only 2% per year for 5 years.
  4. Find the price they should ask for the chain given a 2% growth rate per year.

Solutions

Expert Solution

jeff jeffy answered 2 years ago
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