In-Class Practice Problems_M3_L6_L7

You own a house that you rent for $1,200 a month. The maintenance expenses on the house average $200 a month. The house cost $89,000 when you purchased it several years ago. A recent appraisal on the house valued it at $120,000. The annual property taxes are $5,000. If you sell the house you will incur $25,000 in expenses. You are deciding whether to sell the house or convert it for your own use as a professional office. What value should you place on this house when analyzing the option of using it as a professional office?

You own a house that you rent for $1,100 per month. The maintenance expenses on the house average $200 per month. The house cost $219,000 when you purchased it 4 years ago. A recent appraisal on the house valued it at $241,000. If you sell the house you will incur $19,280 in real estate fees. The annual property taxes are $2,500. You are deciding whether to sell the house or convert it for your own use as a professional office. What value should you place on this house when analyzing the option of using it as a professional office?

You own a house that you rent for $1,400 per month. The maintenance expenses on the house average $260 per month. The house cost $231,000 when you purchased it 4 years ago. A recent appraisal on the house valued it at $253,000. If you sell the house you will incur $20,240 in real estate fees. The annual property taxes are $3,100. You are deciding whether to sell the house or convert it for your own use as a professional office. What value should you place on this house when analyzing the option of using it as a professional office? Multiple Choice $232,760 $231,000 $228,000 $253,000 $0

A family wants to purchase a house that costs $135,000. They plan to take out a $125,000 mortgage on the house and put $10,000 as a down payment. The bank informs them that with a 15-year mortgage their monthly payment would be $718.77 and with a 30-year mortgage their monthly payment would be $582.86. Determine the amount they would save on the cost of the house if they selected the 15-year mortgage rather than the 30-year mortgage. **** How much would they save if they selected the 15-year mortgage?

You have been transferred to New Mexico for your post-graduate internship. You and your spouse have 2 children. You decide you need a home. The current owner of the home will sell it to you for $120,000, or you can rent it for $900 per month on a 1-year lease. You believe you could resell the home after 1 year for $130,000. Should you purchase the home or rent it?

Mr. Russ T. Steele sels his old vehicle for $5000 (you get more if you private sale!) and pays cash for a used (but newer vehicle) that costs $10.000. He also understands that he needs to allow for maintenance and operation costs of his vehicle. He estimates that these costs will be approximately $2000 a year and estimates that the costs will increase by $100 per year. He hopes to keep the vehicle for five years and then sell it for an estimated value of $2000. Mr. Steele has an MARR of 8%. The equivalent annual cost of the cash flow associated with his purchase is most nearly: $-1,850 $-3,100 $3,000 $3,800

You are trying to evaluate the feasibility of purchasing a land. You plan to rent the plot of land to receive after-tax receipts of $2,500 per month. You are hoping to sell the land in the next ten years to receive after-tax proceeds of US$2.0 million to purchase a building containing at least four apartments. Assume the funds for purchasing the apartment will be drawn from your savings account which is currently earning 2% after taxes and that inflation rate is currently 5%. a) Identify the cash flows, their timing and the required rate of return applicable to calculating the maximum value you should pay for the land. b) Showing all calculations state if you should purchase the land for $1.6 million, justify your decision. What is the maximum price you should pay to acquire the single dwelling unit?

The Bainters want to estimate annual costs for purchasing the home so they can compare them with the costs they estimated for renting. These costs are expenses the Bainters will have only if they purchase instead of rent: monthly mortgage payment $200 per year for HOA fees $1,750 per year for property taxes $1,950 per year for home maintenance $75 per month for water and sewer services $10 per month for trash and recycling services $65 per month for internet $110 per month for homeowners' insurance Approximately how much should the Bainters budget for a year? Your answer should include the total amount the Bainters should budget the calculations or an explanation of how you determined the answer

The Potters want to buy a small cottage costing $119,000 with annual insurance and taxes of $760 and $2900, respectively. They have saved $11,000 for a down payment, and they can get a 6%, 10-year mortgage from a bank They are qualified for a home loan as long as the total monthly payment does not exceed $1000. Are they qualified? What is the total monthly payment?

You are trying to evaluate the feasibility of purchasing a quarter-acre plot (approximately 11,000 square feet) of agricultural land that has proper drainage and access to paved roads. You plan to rent the plot of land to receive after-tax receipts of US$2,500 per month. You are hoping to sell the land in the next ten years to receive after-tax proceeds of US$2.0 million to purchase a building containing at least four (two-bedroom) apartments. Assume the funds for purchasing the apartment will be drawn from your savings account which is currently earning 2% after taxes and that inflation rate is currently 5%.   1.Showing all calculations state if you should purchase the land for $1.6 million, justify your decision. What is the maximum price you should pay to acquire the single dwelling unit?

You are trying to evaluate the feasibility of purchasing a quarter-acre plot (approximately 11,000 square feet) of agricultural land that has proper drainage and access to paved roads. You plan to rent the plot of land to receive after-tax receipts of US$2,500 per month. You are hoping to sell the land in the next ten years to receive after-tax proceeds of US$2.0 million to purchase a building containing at least four (two-bedroom) apartments. Assume the funds for purchasing the apartment will be drawn from your savings account which is currently earning 2% after taxes and that inflation rate is currently 5%. a) Identify the cash flows, their timing and the required rate of return applicable to calculating the maximum value you should pay for the land. b) Showing all calculations state if you should purchase the land for US$1.6 million, justify your decision. What is the maximum price you should pay to acquire the single dwelling unit?

The Potters want to buy a small cottage costing $120,000 with annual insurance and taxes of $740 and $2200, respectively. They have saved $15,000 for a down payment, and they can get a 6%, 25-year mortgage from a bank. They are qualified for a home loan as long as the total monthly payment does not exceed $1000. Are they qualified? Click the icon to view the Real Estate Amortization Table Select the correct choice below and fill in the answer box to complete your choice. (Round to the nearest cent as needed.) OA. No, because the total monthly payment is $ OB. Yes, because the total monthly payment is $ Submit test 0 ma on mo CHE Op ADD Ques

Rex is planning to buy a house. His gross income is $72000 and his net income is $60000. He saved $30000 for the downpayment. The monthly expenses are $250 for property taxes and $150 for heat. His bank uses the GDSR maximum approval ratio of $32%. The approval interest rate on a 5-year term will be 4.64%. Calculate the maximum mortagage Rex could arrange on the new house and Present all calculations and TVM variables when cal

Erica is planning on putting an addition on her home. She figures that this will cost a total of $25,800. If Erica already has $23,300 saved up, what annual interest rate compounded semiannually would Erica need to earn in order to have the required landscaping funds if she invests her money for 2.5 years?

Steven is thinking about buying a duplex. His monthly expenses will be $888 for the mortgage, $480 for taxes, and $420 for insurance period he also needs to pay a yearly association fee of $888.00. If he can rent out 1/2 of the unit for $1535 per month, how much will he make or lose per month? Loss of $60. Loss of $1120. Loss of $327.

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Joe's Taco Hut can purchase a delivery truck for $20,000, for which he will take out a loan from the bank. He estimates it will generate a net income (after taxes, maintenance, and operating costs) of $4,000 per year. His other option is to go to work for someone else earning net income of $3,000 per year. Assume that Joe can resell the truck for the entire purchase price of $20,000. What is the VMP for the delivery truck (Joe's MB if he buys it)? Please enter your answer as a numerical response and do not type out your answer as words (ie. $3000 not "Three thousand dollars"). Will Joe buy the delivery truck if the interest rate is 3%? Simply type either "Yes" or "No" into the answer box Will Joe buy the delivery truck if the interest rate is 7%? Simply type either "Yes" or "No" into the answer box What is the highest interest rate Joe would be willing to pay? Please enter your answer as a numerical response and do not type your answer as words (ie. 3% not Three percent").

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The Bainter family is moving to a new town and needs a place to live. The Bainters have narrowed their search to two houses they think will work for their family. The first house is a rental. The monthly rent is listed at $1,190, with the expectation that it will increase 1.7% each year. The second house is available for purchase. The sale price is listed at $195,000, and the Bainters have been approved for a loan that would allow them to purchase the home and pay for it over 30 years. Cost of Renting To estimate the cost of renting, the Bainters read through the rental agreement to determine for what types of costs they would need to budget. These costs include fees, renters' insurance, and utilities. The Bainters also research average prices for anything the landlord would not provide, such as renters' insurance. The Bainters realize they will have approximately the same costs for electricity and natural gas whether they rent or purchase, so they decide to exclude…