With extra cash from operations, Ace Auto Parts decides to buy a Savings and loa
ID: 1091046 • Letter: W
Question
With extra cash from operations, Ace Auto Parts decides to buy a Savings and loan. Ace will pay 400,000 for the S & L with the intention of selling it after five years. Ace hopes to earn a 20% before - tax rate of return. The expected inflation rate is 5%.
A) What should be the amount of the sale price, if Ace is to earn a 20% return on their investment? Exclude the effects of inflation.
B) What should be the amount of the sale price, if Ace is to earn a 20% return on their investment after considering the effects of inflation?
Explanation / Answer
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