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- Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master Industries (the manufacturer) has agreed to accept $23,500 at the end of each of the next 4 years. Based on this deal, how much interest will Grummet pay over the life of the loan? A. $94,000 B. $80,000 C. $23,500 D. $14,000A student is buying a new car. The car’s price is $37,500, the sales tax is 6%, and the title, license, and registration fee is $1250 to be paid in cash. The dealer offers to finance 95% of the car’s price for 48 months at a nominal interest rate of 9% per year, compounded monthly. (a) How much cash is paid when the car is purchased? (b) How much is the monthly payment?In August 2008, a car manufacturing company was offering the choice of a 3.3% loan for 72 months, or $3000 cash back on the purchase of a $25,377 car. (a) If someone took the 3.3% loan offer, how much will the monthly payment be? (b) If someone took the $3000 cash-back offer and can borrow money from their local credit union at 7.6% interest compounded monthly for six years, how much will the monthly payment be? (c) Which of the two offers is more favorable?
- 1. You and the dealer have agreed upon the purchase price for a new automobile. The purchase price is $38,000. In addition, sales tax of $2,280, a documentation fee of $500 is added to you purchase price. You make an initial payment of $5,000 and seek to finance the remaining balance. Your automobile dealer has a finance opportunity which will allow you to defer your first payment for 6 months. Your car payments will be paid each monthly over a 3-year period beginning the first month after the 6 months deferral period. The interest rate is 6% per year for the duration of the loan and interest accrue monthly during the 6 months' deferral period. a. Draw the cash flow diagram from your perspective. b. What are your monthly payments? You decide to pay off your loan when you make your 24th payment. What will be your total 24th payment?An automobile is “priced” at $7,000. A buyer may purchase the car for $6,500 now or, alternatively, the buyer can make a down payment of $1,000 now and pay the remaining $6,000 in 8 equal quarterly payments (over 2 years) at 8% compounded quarterly. Solve, a. If the buyer’s TVOM is 10% per year compounded quarterly, would the buyer prefer to pay the $6,500 outright or make the down payment and the quarterly payments? b. What is the effective annual interest rate at which these two payment options are equivalent?A car is to be purchased in monthly payments of P17,000 for 4 years starting at the end of 4 months. How much is the fair market value of the car if the interest rate used is 12% converted monthly and down payment is 65,000? __13. How many artificial payments is given? A. 3 B. 4 C. 7 D.8
- Two plans are available for a company to obtain automobiles for its salesmen. How many miles must the cars be driven each year for the two plans to have the same costs? Use an interest rate of 10%. Plan A: Lease the cars and pay $0.28 per mile. Plan B: Purchase the cars for $6000 and economic life of three years, after which it can be sold for $1999. Gas and oil cost $0.05 per mile. Insurance is $500 per yearTwo plans are available for a company to obtain automobiles for its salesmen. Use an interest rate of 10%. Plan A: Lease the cars and pay $0.20 per mile. Plan B: Purchase the cars for $6000 and economic life of three years, after which it can be sold for $1200. Gas and oil cost $0.05 per mile. Insurance is $500 per year A. What is annual cost for plan B? B. What is the annual cost of plan A if the miles driven by the car is 10,000?There is a choice to buy a car worth $28,000 with 100% financing at 4.99% APR for 60 month or lease at $450 per month. The car will need maintenance in the 3rd year worth $525 and $825 in the 4th year. The car will have 35% residual value in the 5th year. Sales tax on new car is 6% and required rate of return is 5%. calculate the Ownership Operating Advantage in year 1. $8861 ($939) ($1764) ($1464)
- A buyer is considering purchasing a 10-acre parcel in Peoria, Arizona for economic development. The parcel has a sales price of $720,000. The buyer agrees with the seller for purchasing the property with 15% down up front and paying off the balance in 12-months. If a bank is willing to provide 3% annual interest, compounded monthly, how much should the monthly deposit be into that account to pay off the desired balance to the seller?Suppose that you have decided to buy a certain car that costs $28,950, including taxes and license fees. The dealership gives you two financing options: 1) Option A: The dealership takes $800 off the price of the car. You must make a down payment of $2000 and can finance the rest at 2.99% APR for 72 months. a) How much will you be financing? b) How much will your monthly payments be under this option? (Round to the nearest dollar.) c) How much total money will you pay under this option? (Don’t forget to include your down payment.) 2) Option B: The dealership takes $1000 off the price and 0% financing for 36 months. a) How much will you be financing? b) How much will your monthly payments be under this option? (Round to the nearest dollar.) c) How much total money will you pay under this option? 3) Would you choose option A or option B? Why?In order to purchase another truck, Beatty Transport recently obtained a $125,000 loan for five years at 7.8% compounded semiannually. a. What are the monthly payments on the loan? b. The company is considering selling the truck at the end of 3 years and paying off the balance of the loan. What should the monthly payments be so that the value of loan at the end of the first 3 years is $55,000?
