With extra cash from operations, Ace Auto Parts decides to buy a Savings and Loa

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

anyone know this ?

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