Bob invests $10,000 today. It grows for 3 years at 7% interest. After the three years are up, Bob re-invests half of it in a CD paying 3% for 5 years and he invests the other half in a stock that is earning 11.5% for three years. After the CD matures, he re-invests the proceeds from the CD in a lawn care business that is earning 17%. The lawn care money stays invested for 15 years. The money he receives from the sale of his stock he re-invests in a restaurant that earned 7% for its first 6 years and then begins earning 9.5%. At the point in time when Bob owns the lawn care business for 15 years, he receives an offer from Kermit to buy both the restaurant and the lawn care business (together) for a total of $350,000.
a. Does the $350,000 offer from Kermit sound like a good price?
b. What is the correct value of Bob’s investments at this point?
c. If Bob left the investments alone for another 10 years, how much would his investments be worth, assuming the growth continues to compound at the same rates the two businesses are currently earning? Please show all calculations.