Antonio would like to replace his gold clubs with a custom-measure set. A local sporting goods megastore is advertising custom clubs for $800, including a new bag. In-store financing is available at 2 percent, or he can choose not to renew his $500 certificate of deposit (CD), which just matured. The advertised CD renewal rate is r percent. Antonio knows the in-store financing costs will not affect his taxes, but he knows he’ll pay taxes (25% federal and 5.75% state taxes) on the CD interest earnings. Should he cash in the CD or use the in-store financing? Why?

Antonio would like to replace his gold clubs with a custom-measure set. A local sporting goods megastore is advertising custom clubs for $800, including a new bag. In-store financing is available at 2 percent, or he can choose not to renew his $500 certificate of deposit (CD), which just matured. The advertised CD renewal rate is r percent. Antonio knows the in-store financing costs will not affect his taxes, but he knows he’ll pay taxes (25% federal and 5.75% state taxes) on the CD interest earnings. Should he cash in the CD or use the in-store financing? Why?

Individual Income Taxes

43rd Edition

ISBN:9780357109731

Author:Hoffman

Publisher:Hoffman

Chapter11: Investor Losses

Section: Chapter Questions

Problem 3RP

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Antonio would like to replace his golf clubs with a custom-measured set. A local sporting goods megastore is advertising custom clubs for $890, including a new bag. In-store financing is available at 3.15 percent, or he can choose not to renew his $500 certificate of deposit (CD), which just matured. The advertised CD renewal rate is 3.33 percent. Antonio knows the in-store financing costs would not affect his taxes, but he knows he'll pay taxes (25 percent federal and 5.75 percent state) on the CD interest earnings. Should he cash the CD or use the in-store financing? Why? what is the after-tax CD earnings rate? Answer with a percent.
Antonio would like to replace his golf clubs with a custom-measured set. A local sporting goods megastore is advertising custom clubs for $730730, including a new bag. In-store financing is available at 5.895.89 percent, or he can choose not to renew his $400400 certificate of deposit (CD), which just matured. The advertised CD renewal rate is 7.687.68 percent. Antonio knows the in-store financing costs would not affect his taxes, but he knows he'll pay taxes (2525 percent federal and 5.755.75 percent state) on the CD interest earnings. Should he cash in the CD or use the in-store financing? Why? Note: Round intermediate computations to at least five (5) decimal places. Question content area bottom Part 1 The after-tax CD earnings rate is 5.31845.3184%. (Round to two decimal places.) Part 2 Should he cash the CD or use the in-store financing? (Select the best choice below.) A. Antonio should cash in his CD to purchase the golf clubs…
Antonio would like to replace his golf clubs with a custom-measured set. A local sporting goods megastore is advertising custom clubs for $530530, including a new bag. In-store financing is available at 3.253.25 percent, or he can choose not to renew his $400400 certificate of deposit (CD), which just matured. The advertised CD renewal rate is 3.043.04 percent. Antonio knows the in-store financing costs would not affect his taxes, but he knows he'll pay taxes (2525 percent federal and 5.755.75 percent state) on the CD interest earnings. Should he cash in the CD or use the in-store financing? Why? Note: Round intermediate computations to at least five (5) decimal places. Question content area bottom Part 1 The after-tax CD earnings rate is enter your response here%. (Round to two decimal places.)
Deja owns a photo printing business and wants to purchase a new state-of-the-art photo printer that she found online for $9,275, plus sales tax of 5.5%. The supply company is offering cash terms of 2/15, n/30, with a 1.5% service charge on late payments, or 90 days same as cash financing if Deja is approved for a company line of credit. If she is unable to pay within 90 days under the second option, she would have to pay 22.9% annual simple interest for the first 90 days, plus 2% simple interest per month on the unpaid balance after 90 days. Deja has an excellent credit rating but is unsure of what to do. a) If Deja took the cash option and was able to pay off the printer within the 15-day discount period, how much would she save? How much would she owe? b) If Deja takes the 90 days same as cash option and purchases the printer on December 30 to get a current-year tax deduction, using exact time, what is her deadline for paying no interest in a non-leap year? In a leap year?
Deja owns a photo printing business and wants to purchase a new state-of-the-art photo printer that she found online for $9,275, plus sales tax of 5.5%. The supply company is offering cash terms of 2/15, n/30, with a 1.5% service charge on late payments, or 90 days same as cash financing if Deja is approved for a company line of credit. If she is unable to pay within 90 days under the second option, she would have to pay 22.9% annual simple interest for the first 90 days, plus 2% simple interest per month on the unpaid balance after 90 days. Deja has an excellent credit rating but is unsure of what to do. d) Deja finds financing through a local bank. Find the bank discount and proceeds using ordinary interest for a 90-day promissory note for $9,500 at 8% annual simple interest. Is this enough money for Deja to cover the purchase price of the printer? Is this a better option for Deja to pursue, why or why not?
Deja owns a photo printing business and wants to purchase a new state-of-the-art photo printer that she found online for $9,275, plus sales tax of 5.5%. The supply company is offering cash terms of 2/15, n/30, with a 1.5% service charge on late payments, or 90 days same as cash financing if Deja is approved for a company line of credit. If she is unable to pay within 90 days under the second option, she would have to pay 22.9% annual simple interest for the first 90 days, plus 2% simple interest per month on the unpaid balance after 90 days. Deja has an excellent credit rating but is unsure of what to do. c) If Deja takes the 90 days same as cash and pays within 90 days, what is her payoff amount? If she can't pay until April 30, how much additional money would she owe? (Assume ordinary interest and exact time and a non-leap year)
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.…
antonio would like to replace his golf clubs with a custom measured set. a local sporting goods megastore is advertising custom clubs for $800. including a new bag. in store financing is avabiable at 2 percent or he can choose not to renew his S500 certifcate of deposit, which just matured, the adverstised CD renewl rate is 2 percent. antonio knows yaxes but he knows hell pay taxes (25% federal taces and 5.75% state taxes) on the CD intrest earnngs, should he cash in the CD or use the in store fincnacing why?
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 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)?
Joe sends a check for $218 to the University by July 1 of every year to cover the cost of two tickets for each of the 7 home games plus $50 for a parking permit. Joe has difficulty finding friends to accompany him to the games. However, he is adamant that he must go to the games because he has paid for the tickets. Friends insist that the cost of the tickets is a sunk cost and that the decision should be based on future costs that would be different between alternatives – going to the game and not going to the game. Friends have calculated the fuel for the 6-hour round trip costs $15 and two meals while away from home for the game can easily cost $30 or more. Required Write a list to Joe outlining the relevant costs associated with a trip to the game.
Angela is buying her first home. She has saved $60, 000 for a downpayment, intending to make a down payment of at least 20% of the purchase price. Angela wants to make an offer on a home which is slightly over her budget at $325,000. As she does not have any additional funds available to increase her downpayment, she needs to consider a high ratio mortgage. Her lender explains that she will need to pay mortgage default insurance premiums, and that the premiums can be paid in cash or financed over the first mortgage term. He provides the following premium rate schedule: Loan - to - Value Ratio Mortgage Default Insurance Premium (As a percentage of mortgage loan) Up to 80% 2.40% Up to 85% 2.80% Up to 90% 3.10% Up to 95% 4.00% Angela is pre- approved for a mortgage with a 25-year amortization period and an equivalent annual interest rate of 6.39% for a five-year term. Payments will be due at the end of each month. If Angela finances the mortgage default insurance premiums over her first…