a) Gerry likes driving small cars and buys nearly identical ones when- ever the old one needs replacing. Typically, he trades in his old car for a new one costing about $15 000. A new car warranty covers all repair costs above standard maintenance (standard maintenance costs are constant over the life of the car) for the first two years. After that, his records show an average repair expense (over standard maintenance) of $2500 in the third year (at the end of the year), increasing by 50 percent per year thereafter. If a 30 percent declining- balance depreciation rate is used to estimate salvage values and interest is 8 percent, how often should Gerry get a new car?
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- Carlos opens a dry cleaning store during the year. He invests 30,000 of his own money and borrows 60,000 from a local bank. He uses 40,000 of the loan to buy a building and the remaining 20,000 for equipment. During the first year, the store has a loss of 24,000. How much of the loss can Carlos deduct if the loan from the bank is nonrecourse? How much does Carlos have at risk at the end of the first year?Gerry likes driving small cars and buys nearly identical ones whenever the old one needs replacing. Typically, he trades in his old car for a new one costing about $15 000. A new car warranty covers all repair costs above standard maintenance (standard maintenance costs are constant over the life of the car) for the first two years. PART A: After two years, his records show an average repair expense (over standard maintenance) of $2500 in the third year (at the end of the year), increasing by 50 percent per year thereafter. If a 30 percent declining-balance depreciation rate is used to estimate salvage values and interest is 8 percent, how often should Gerry get a new car with this cost in the third year? PART B: After two years, his records show an average repair expense (over standard maintenance) of $1500 in the third year (at the end of the year), increasing by 50 percent per year thereafter. If a 30 percent declining-balance depreciation rate is used to estimate salvage values…They are considering trading their car in for a newer used vehicle so that Harry can have dependable transportation for commuting to work. The couple still owes $4,770 to the credit union for their current car, or $265 per month for the remaining 18 months of the 48-month loan. The trade-in value of this car plus $1,000 that Harry earned from a freelance interior design job should allow the couple to pay off the auto loan and leave $1,400 for a down payment on the newer car. The Johnsons have agreed on a sales price for the newer car of $23,000. The money planned for tires will be spent for other incidental taxes and fees associated with the purchase. 1. Using the Garman/Forgue companion website or the information in Table 7-2, calculate the monthly payment for a loan period of three, four, five, and six years at 8 percent APR. Round your answers to the nearest cent. Round Monthly Installment Payment for a Loan in intermediate calculations to the nearest cent.
- After visiting several automobile dealerships, Richard selects the used car he wants. He likes its $12,900 price, but financing through the dealer is no bargain. He has $2,500 cash for a down payment, so he needs an $10,400 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $10,400 for a period of four years at an add-on interest rate of 10 percent. What is the total interest on Richard’s loan? Note: Do not round intermediate calculations. Round your answer to the nearest whole number. What is the total cost of the car? Note: Do not round intermediate calculations. Round your answer to the nearest whole number. What is the monthly payment? Note: Do not round intermediate calculations. Round your answer to the nearest whole number.…In order to buy a new car, you finance $24,000 with no down payment for a term of five years at an APR of 6%. After you have the car for one year, you are in an accident. No one is injured, but the car is totaled. The insurance company says that before the accident, the value of the car had decreased by 25% over the time you owned it, and the company pays you that depreciated amount after subtracting your $500 deductible.What is your monthly payment for this loan? (Round your answer to the nearest cent.)Amanda Forsythe of Springfield, Missouri, must decide whether to buy or lease a car she has selected. She has negotiated a purchase price (gross capitalized cost) of $30,000 and could borrow the money to buy from her credit union by putting $2,500 down and paying $645.84 per month for 48 months at 6 percent APR. Alternatively, she could lease the car for 48 months at $370 per month by paying a $2,500 capitalized cost reduction and a $350 disposition fee on the car, which is projected to have a residual value of $12,200 at the end of the lease. Round your answers to the nearest cent. Finance charges (borrowing the car): $ The dollar cost of leasing: $
- In order to buy a new car, you finance $20,000 with no down payment for a term of five years at an APR of 6%. After you have the car for one year, you are in an accident. No one is injured, but the car is totaled. The insurance company says that before the accident, the value of the car had decreased by 25% over the time you owned it, and the company pays you that depreciated amount after subtracting your $500 deductible.Suggestion: Use the following formula for the equity built up after k monthly payments. Equity = Amount borrowed × ((1 + r)k − 1) ((1 + r)t − 1) Can you pay off the loan using the insurance payment, or do you still need to make payments on a car you no longer have? Yes, you can pay off the loan using the insurance payment.No, you cannot pay off the loan using the insurance payment. If you still need to make payments, how much do you still owe? (Subtract the payment from the insurance company. Round your answer to the nearest cent. If you no longer…Amanda must decide to buy or lease a car that she has selected. She has negoiated a purchase price of $35,000 and can borrow money from her credit union by putting $3,000 down and paying $751.68 per month for 48 months at 6% APR. Alternatively, she could lease the car for 48 months at $495 per month by paying $3,000 capitalized cost reduction and a $350 dispostition fee on the car whic is project to have a residual value of $12,100 at the end of the lease. 1. What is the buying dollar cost? 2. What is the leasing dollar cost?After visiting several automobile dealerships, Richard selects the car he wants. He likes its $10,500 price, but financing through the dealer is no bargain. He has $2,100 cash for a down payment, so he needs an $8,400 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $8,400 for a period of two years at an add-on interest rate of 10 percent. a) What is the total interest on Richard’s loan? b) What is the total cost of the car? c) What is the monthly payment? d) What is the annual percentage rate (APR)?
- Amanda Forsythe of Springfield, Missouri, must decide whether to buy or lease a car she has selected. She has negotiated a purchase price (gross capitalized cost) of $38,000 and could borrow the money to buy from her credit union by putting $3,300 down and paying $814.93 per month for 48 months at 6 percent APR. Alternatively, she could lease the car for 48 months at $535 per month by paying a $3,300 capitalized cost reduction and a $350 disposition fee on the car, which is projected to have a residual value of $11,800 at the end of the lease. Use the Run the Numbers worksheet to advise Amanda about whether she should finance or lease the car. Round your answers to the nearest cent.To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Deloch purchased the stereo systems for $138,000 and sold them for $258,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 6 percent of sales. During the year, she paid $1,480 cash to replace a defective tuner. Required a-1. Prepare an income statement for Deloch’s first year of operation. a-2. Prepare a statement of cash flows for Deloch’s first year of operation.To support herself while attending school, Daun Deloch sold stereo systems to other students. During the first year of operations, Daun purchased the stereo systems for $260,000 and sold them for $370,000 cash. She provided her customers with a one-year warranty against defects in parts and labor. Based on industry standards, she estimated that warranty claims would amount to 2 percent of sales. During the year, she paid $4,020 cash to replace a defective tuner. Requireda. Prepare an income statement and statement of cash flows for Daun’s first year of operation. b. Based on the information given, what is Daun’s total warranties liability at the end of the accounting period?