Paul Adams owns a health club in downtown Los Angeles. He charges his customers an annual...

90.2K

Verified Solution

Question

Finance

Paul Adams owns a health club in downtown Los Angeles. Hecharges his customers an annual fee of $940 and has an existingcustomer base of 490. Paul plans to raise the annual fee by 7percent every year and expects the club membership to grow at aconstant rate of 3 percent for the next five years. The overallexpenses of running the health club are $114,000 a year and areexpected to grow at the inflation rate of 4 percent annually. Afterfive years, Paul plans to buy a luxury boat for $400,000, close thehealth club, and travel the world in his boat for the rest of hislife. Assume Paul has a remaining life of 25 years and earns 10percent on his savings.
How much will Paul have in his savings on the day he starts hisworld tour assuming he has already paid for his boat? (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Account value at retirement $
What is the annual amount that Paul can spend while on his worldtour if he will have no money left in the bank when he dies? (Donot round intermediate calculations and round your answer to 2decimal places, e.g., 32.16.) Annual withdrawal $

Answer & Explanation Solved by verified expert

4.1 Ratings (765 Votes)

First Part Assumption All savings take place at the end of year Year n Linkage 1 2 3 4 5 yoy growth in Annual membership fees 7 7 7 7 Customer base 3 3 3 3 Expenses 4 4 4 4 Annual membership fees A 940 1006 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Paul Adams owns a health club in downtown Los Angeles. Hecharges his customers an annual fee of $940 and has an existingcustomer base of 490. Paul plans to raise the annual fee by 7percent every year and expects the club membership to grow at aconstant rate of 3 percent for the next five years. The overallexpenses of running the health club are $114,000 a year and areexpected to grow at the inflation rate of 4 percent annually. Afterfive years, Paul plans to buy a luxury boat for $400,000, close thehealth club, and travel the world in his boat for the rest of hislife. Assume Paul has a remaining life of 25 years and earns 10percent on his savings.How much will Paul have in his savings on the day he starts hisworld tour assuming he has already paid for his boat? (Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.) Account value at retirement $What is the annual amount that Paul can spend while on his worldtour if he will have no money left in the bank when he dies? (Donot round intermediate calculations and round your answer to 2decimal places, e.g., 32.16.) Annual withdrawal $