Small fast-food restaurant with three other partners

Assignment Help Financial Management

Reference no: EM131587380

An investor is trying to decide whether to invest the $30,000 he received from the sale of his boat in the stock market or in a small fast-food restaurant with three other partners. If he buys the stock, he will receive 3500 shares, which pay dividends of $1 per share each quarter. He expects the stock to appreciate to $40,000 six years from now.

If he invests in the restaurant, he will have to put up another $10,000 one year from now, but starting two years from now, his share of the profits will be $9,000 per year for 5 years, after which time he will receive $35,000 from the sale of the business. Using Present Worth analysis and an interest rate of 12%/yr compounded quarterly, determine which investment he should select.

Draw Cash Flow Diagrams for each alternative.

Reference no: EM131587380

Questions Cloud

What is the cost of common? equity : Calculate the cost of common equity. What is the cost of common? equity?

Describe the weaknesses in acme enterprises payroll process : In a typed memo to Pat - CEO of Acme Enterprises, identify and describe the weaknesses in Acme Enterprises' payroll process

Describe and explain the shape of the yield curve : Describe and explain the shape of the yield curve. What does the curve tell us about the anticipated future of the economy?

Pf is generated by a finite set of circuits : In the proof of Theorem (from (c) to (a)), show that the subcases (A3), (B1), and (B3) cannot occur.

Small fast-food restaurant with three other partners : he received from the sale of his boat in the stock market or in a small fast-food restaurant with three other partners.

Product or service to the organization : Create a 2- to 3-screen wireframe that demonstrates your ideas for the product or service to the organization.

Evaluate possible solutions-weigh the strengths : Evaluate possible solutions-weigh the strengths and limitations of each solution you discovered in Step 3 - Choose a solution-consider several factors such

What role does monetarism have in current monetary policy : What role does monetarism have in current monetary policy? Has Monetarism been an effective tool for conducting monetary policy?

Consistently run large balance of trade deficits : The US economy has consistently run large balance of trade deficits and large balance of current account deficits since the 1980’s.

User Account

All Pages