29. Annuities. You can buy a car that is advertised for $24,000 on the following terms: (a) pay $24,000 and receive a $2,000 rebate from the manufacturer; (b) pay $500 a month for 4 years for total payments of $24,000, implying zero percent financing. Which is the better deal if the inter- est rate is 1% per month? (LO5-3)
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- Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the yearNow assume that it is several years later. The brothers are concerned about the firm’s current credit terms of net 30, which means that contractors buying building products from the firm are not offered a discount and are supposed to pay the full amount in 30 days. Gross sales are now running $1,000,000 a year, and 80% (by dollar volume) of the firm’s paying customers generally pay the full amount on Day 30; the other 20% pay, on average, on Day 40. Of the firm’s gross sales, 2% ends up as bad-debt losses. The brothers are now considering a change in the firm’s credit policy. The change would entail: (1) changing the credit terms to 2/10, net 20, (2) employing stricter credit standards before granting credit, and (3) enforcing collections with greater vigor than in the past. Thus, cash customers and those paying within 10 days would receive a 2% discount, but all others would have to pay the full amount after only 20 days. The brothers believe the discount would both attract additional customers and encourage some existing customers to purchase more from the firm—after all, the discount amounts to a price reduction. Of course, these customers would take the discount and hence would pay in only 10 days. The net expected result is for sales to increase to $1,100,000; for 60% of the paying customers to take the discount and pay on the 10th day; for 30% to pay the full amount on Day 20; for 10% to pay late on Day 30; and for bad-debt losses to fall from 2% to 1% of gross sales. The firm’s operating cost ratio will remain unchanged at 75%, and its cost of carrying receivables will remain unchanged at 12%. To begin the analysis, describe the four variables that make up a firm’s credit policy and explain how each of them affects sales and collections.21. You can buy a car advertised for $12,000 on the following terms: (a) pay $12,000 and receive a $1,000 rebate from the manufacturer, or (b) pay $250 a month for 4 years, for total payments of $12,000, implying 0% financing. Which is a better deal if the interest rate is 1% per month?
- For item (13) 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?Please Solve This Question The D.J. Masson Corporation needs to raise 500,000 for 1 year to supply working capital to a new store. Masson buys from its suppliers on terms of 3/10, net90, and it currently pays on the 10th day and takes discounts. However, it could forgo the discounts, pay on the 90th day, and thereby obtain the needed$500,000 in the form of costly trade credit. What is the effective annual interest rate of this trade credit?The D.J. Masson Corporation needs to raise $500,000 for 1 year to supplyworking capital to a new store. Masson buys from its suppliers on termsof 3/10, net 90, and it currently pays on the 10th day and takes discounts.However, it could forgo the discounts, pay on the 90th day, and therebyobtain the needed $500,000 in the form of costly trade credit. What is theeffective annual interest rate of this trade credit?
- Lola's Furniture is offering a "houseful of furniture" for $9,999. Furthermore, if you make a down payment of $999 you can wait for 1½ years to pay the $9,000 balance. If Lola's Furniture immediately sells the $9,000 receivable contract to the Barzini Finance Group at a discount rate of 18% compounded quarterly, how much money will Lola's actually receive for the "houseful of furniture"?You want to buy a new sports coupe for $78,500, and the finance office at the dealership has quoted you an APR of 6 percent for a 60 month loan to buy the car. a. What will your monthly payments be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the effective annual rate on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)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
- You want to buy a new sports coupe for $74,400, and the finance office at the dealership has quoted you a loan with an APR of 6.8 percent for 48 months to buy the car. a. What will your monthly payments be? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the effective annual rate on this loan? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)Jeanelle is planning to borrow money amounting to ₱ 250,000.00 Limbon Rural Bank is offering 1.25% compounded semi – annually, while Buli Cooperative Bank offers 1% compounded monthly. 11.How much will be the maturity value after 5 years if he borrows from Limbon Rural Bank? a. ₱ 266,071.86 b. ₱ 207,660.68 c. ₱ 367,071.88 d. ₱ 376,716. 66To pay its supplier, Tokyo Corporation requires P300,000. The bank of Tokyo Corporation offers a 210-day loan with a simple interest rate of 11 percent and a compensating balance requirement of 20 percent. Given that there are 360 days in a year and Tokyo Corporation has no funds at the lending bank, what is the annual percentage rate (APR) of the loan? a. 14.14% b. 12.55% c. 8.02% d. 11.00% e. 13.75%