Paul Adams owns the health club in downtown Los Angeles. He charges his customers annual fee of $530 and has existing customer base of 560. Paul plans to increase the annual fee by 5.7 percent every year and expects the club membership to grow at the constant rate of 3.6 percent for the next five years. The entire expenses of running the health club are $74,200 a year and are anticipated to grow at the inflation rate of 1.2 percent annually. After five years, Paul plans to purchase a luxury boat for $485,000, close the health club, and travel the world in his boat for the rest of his life.
Required:
Compute the annual amount that Paul can spend while on his world tour if he will have no money left in the bank when he dies? Suppose Paul has a remaining life of 22 years and earns 10 percent on his savings.