5. In the past, a car manufacturer advertised 0% financing on many of its models. For example, a particular model had a cashprice of $13,174.09. However, if you elected to buy the car under the 0% financing deal, then the manufacturer used a priceof $15,408. If you chose a 48-month term, then the manufacturer calculated your monthly loan payments using the 0%financing price instead of the cash price ($321 per month). In the fine print, the manufacturer was legally obliged to disclosethe effective annual rate that it charged for the loan. What rate did the manufacturer disclose?A. 8.00%B. 8.19%C. 7.90%D. 8.00%

Cash price = $13,174.09Payment per month = $321Time = 48 monthsPrice under 0% financing deal =…

Answered: 5. In the past, a car manufacturer…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

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Problem: Yuseff was able to sell a car whose suggested retail price is $1,2000.000. The vehicle will be financed through a bank. The required down payment was $120,000.00 and the monthly amortization for 6 years will be 22,000.00. The car dealer gave 4% commission rate. Questions: 1. What percent of retail price is the down payment? 2. How much was the gross balance or the amount to be financed by the bank?
A local used car dealer calculates its “4%” financing as follows. If $3600 is borrowed to be repaid over a 3-year period, the interest charge is ($3600)(0.04)(3 years) = $432. The $432 of interest is deducted from the $3600 loan and the customer has $3168 toward the cost of a car. The customer must repay the loan with 1/36 of $3600, or $100, monthly payments for 36 months. (a) What effective annual interest rate is being charged? (b) What is your view of the ethics of this loan calculation? Do you believe deception is involved? In what circumstances do you view deception as ethical?
When advertising special financing deals, car makers often use rates to describe what your monthly payment will look like. (This is because the amount you need to borrow varies widely based on the car you choose and the down payment you make.) In one recent month, a car company offered 2.9% financing on a coupe which would result in monthly payments of $22.09 per $1000 borrowed for 48 months. For every $___ borrowed the monthly payment will be $___
Suppose you are in the market for a new car worth $18,000. You are offered a deal to make a $1,800 down payment now and to pay the balance in equal end-of-month payments of $421.85 over a 48-month period. Consider the following situations:(a) Instead of going through the dealer's financing, you want to make a down payment of $1,800 and take out an auto loan from a bank at 11.75% compounded monthly. What would be your monthly payment to pay off the loan in four years?(b) If you were to accept the dealer's offer, what would be the effective rate of interest per month charged by the dealer on your financing?
Suppose you want to buy a car. You have surveyed the dealers' newspaper advertisements, and the one shown has caught your attention. You can afford to make a down payment of $2,678.95, so the net amount to be financed is $20,000.(a) What would the monthly payment be?(b) After the 25th payment, you want to pay off the remaining loan in a lumpsum amount. What is this lump sum?
Suppose you are in the market for a new car worth $18,000. You are offered a deal fo make a S1,800 down payment now and to pay the balance in equal end-of-month payments of $421.85 over a 48-month period. Consider the following situations:a.Instead of going through the dealer's financing, you want to make a down payment of $1,800 and take out an auto loan from a bank at 11.75% compounded monthly. What would be your monthly payment to pay off the loan in four years?b. If you were to accept the dealers offer, what would be the effective rate of interest per month charged by the dealer on your financing?
Suppose that you decide to buy a car for $26,635, including taxes and license fees. You saved $7000 for a down payment and can get a three-year car loan at 5.94%. Use PMT= to find the monthly payment and the total interest for the loan. The monthly payment is $ (Round to the nearest cent as needed.) The total interest for the loan is S (Round to the nearest cent as needed.). SEED PA [¹-¹-] 4
2. You purchase a basic package, 4-door sedan for your company's fleet for $18,000. The 3 year loan has an interest rate of 13.75%. You make 10 payments and decide the 11th will be the payment to pay off the loan in its entirety. How much does the 11" payment need to be, using the Actuarial Method?
Van Buren Resources Inc. is considering borrowing $100,000 for 182 days from its bank. Van Buren will pay $6,000 of interest at maturity, and it will repay the $100,000 of principal at maturity. a. Calculate the loan’s annual financing cost. b. Calculate the loan’s annual percentage rate. c. What is the reason for the difference in your answers to Parts a and b?
3.-DO IT IN EXCEL, AND SHOW THE FORMULASThe main supplier of Productos Adiós, S.A., offers you the option of a Cash Discount of 1.5% if you pay before two weeks. You should seriously evaluate this alternative to try to be more efficient in your accounts payable. You can use the direct lending facility that charges interest in advance, at a rate of 14.5% and an origination fee of 1%.This supplier's billing is $450,000 for a one-month term.What is the difference between the supplier's discount and the sum of commission and interest on the financing? A) $476.39 B) None of the above C) $660.87 D) $2,904.26 (Choose one option)
Foxtrot Corporation is purchasing a new Ford Transit delivery van for $24,600. Its lender requires a maximum loan to value ratio of 80% on the purchase price of the vehicle. The term of the loan is 5 years. The interest rate is 5% APR. The loan is a closed end credit loan. There is no trade-in. Sales tax is 7%. Documentation fee is $275. a. What is the total cost of the delivery van including purchase price, sales tax, and documentation fee; and how much is classified as an asset on the balance sheet and how much is classified as an expense on the income statement? b. How much cash must Foxtrot Corporation have to make the down payment? c. How much of the first monthly payment will be interest and how much of the last monthly payment will be interest?
3.-DO IT IN EXCEL, AND SHOW THE FORMULASThe main supplier of Productos Adiós, S.A., offers you the option of a Cash Discount of 1.5% if you pay before two weeks. You should seriously evaluate this alternative to try to be more efficient in your accounts payable. You can use the direct lending facility that charges interest in advance, at a rate of 14.5% and an origination fee of 1%.This supplier's billing is $450,000 for a one-month term.What is the difference between the supplier's discount and the sum of commission and interest on the financing? A) $476.39 B) None of the above C) $660.87 D) $2,904.26

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