Ernie Bilko has a business idea. He wants to rent an abandoned gas station for just the months of November and December. He will convert the gas station into a drive-through Christmas wrapping station. Customers will drive in, drop off their gifts, return the next day, and pick up their wrapped gifts. He needs $333,900 to rent the gas station, purchase wrapping paper, hire workers, and advertise. If he borrows this amount at 6 1/2% interest for those two months, what size lump sum payment will he have to make to pay off the loan? (Round your answer to the nearest cent.)

Ernie Bilko has a business idea. He wants to rent an abandoned gas station for just the months of November and December. He will convert the gas station into a drive-through Christmas wrapping station. Customers will drive in, drop off their gifts, return the next day, and pick up their wrapped gifts. He needs $333,900 to rent the gas station, purchase wrapping paper, hire workers, and advertise. If he borrows this amount at 6 1/2% interest for those two months, what size lump sum payment will he have to make to pay off the loan? (Round your answer to the nearest cent.)

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter16: Tax Research

Section: Chapter Questions

Problem 64DNC

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Ernie Bilko has a business idea. He wants to rent an abandoned gas station for just the months of November and December. He will convert the gas station into a drive-through Christmas wrapping station. Customers will drive in, drop off their gifts, return the next day, and pick up their wrapped gifts. He needs $338,500 to rent the gas station, purchase wrapping paper, hire workers, and advertise. If he borrows this amount at 6 and 1/2% interest for those two months, what size lump sum payment will he have to make to pay off the loan? (Round your answer to the nearest cent.)
Big Sean is buying a new truck from Willie’s Auto Sales, the dealer is providing the financing and he uses the discount method. If borrows $40,000 at 9% for 48 months, how much is his monthly payment?
Camila Torres wants to buy a new high-end audio system for her car. The system is being sold by two dealers in town, both of whom sell the equipment for the same price of $2,000. Camila can buy the equipment from Dealer A, with no money down, by making payments of $173.98 a month for 12 months; she can buy the same equipment from Dealer B by making 36 monthly payments of $66.43 (again, with no money down). Camila is considering purchasing the system from Dealer B because of the lower payment. Find the APR for Dealer A. Round the answer to 2 decimal places. % Find the APR for Dealer B. Round the answer to 2 decimal places. % What do you recommend?
1.Link wants to make $100,000 after tax on his new venture into selling pizza-on-a-stick, using a "push along" cart at the beach. For each pizza-on-a-stick, he incurs raw material costs of $5 and sells them for $10. He pays a salary to his friend Zelda, who operates the cart for $50,000. If he buys the cart himself, he will incur fixed expenses of $20,000. Or, he can rent the cart and pay $1 to the cart supplier each time he sells a pizza stick. What is his point of indifference? That is, at what volume of pizza sticks is he indifferent about renting or buying the cart? (Insert a number ONLY) 2. Like Link, Chrom sells pizza-on-a-stick at the beach. But Chrom also sells dogs-in-a-pocket, which are hot dogs you can carry with you that have enough preservatives to survive in your pocket for years. For each pizza-on-a-stick, Chrom incurs raw material costs of $5 and sells them for $10. He incurs material costs of $3 for the dogs and sells them for $5. He sells 3 times as many dogs as he…
Farrah and Sam Newton, a dual-income couple in their late 20s, want to replace their 7-year-old car, which has 90,000 miles on itand needs some expensive repairs. After reviewing their budget, the Newtons conclude that they can afford auto payments of notmore than $330 per month and a down payment of $2,400. They enthusiastically decide to visit a local dealer after reading itsnewspaper ad offering a closed-end lease on a new car for a monthly payment of $330. After visiting with the dealer, test-drivingthe car, and discussing the lease terms with the salesperson, they remain excited about leasing the car but decide to wait untilthe following day to finalize the deal. Later that day the Newtons begin to question their approach to the new car acquisitionprocess and decide to carefully reevaluate their decision.1. What are some basic purchasing guidelines that the Newtons should consider when choosing which new car to buy orlease? How can they find the information they need?2. How would…
In early December Alice and Bob decided to open Sample Cafe with $16,000 of their ownmoney and $20,000 borrowed from a friend. They have spent $13,000 on equipment andfurniture, and they have purchased $3,200 worth of cups for cash which they expect will beused over the next three months. Having put down a $2,300 deposit for a location on MainSt., they will pay the first month’s rent when they open their doors on January 1.In the balance sheet template below, fill in the appropriate values as of December 31.
4) Brenda is buying a living room set for her home. At Furniture, Inc., she picks out a set for a total cash price of $1,899 The salesperson tells her if she qualifies for an installment loan, she may pay 10% down and finance the balance with payments of $88.35 per month for 24 months?
Adela plans to set up a sewing workshop. She estimates that renting a well-located shop would cost her $ 1,000,000 per month. In addition, she needs to buy an industrial sewing machine for $ 800,000, an overlock machine for $ 500,000, and a cutting machine for $ 600,000. He also needs to buy an ironing machine worth $650,000 and cutting tables and other furniture for an estimated total of $1,500,000.The corporate tax rate is 25% and the fixed assets are depreciated on a straight-line basis over 4 years.The residual value of the fixed assets is equal to 10% of their acquisition value.Adela estimates that in the first year she would generate $25 million in sales revenue, which is estimated to increase by $5 million per year to $40 million per year in the fourth year. Of this amount, the cost of sales is 20% of sales and in addition it must cancel administrative and salary expenses of $ 10 million annually.IT IS REQUESTED: Considering the above, make the 4-year evaluation to conclude…
You own a video store and are considering two alternative ways of making home deliveries to your customers. The first is to buy a car for $ 15,000 and pay a part-time employee $ 4,000 a year to deliver the videos. The other is to hire a service. The service will cost $ 6,000 a year. Assuming that the car will have a life of 6 years and that both employee salary and the service costs will increase 3% a year in perpetuity, which alternative is the more economical one? The firm has a cost of capital of 10%. (You can assume no taxes or depreciation) Answer depends on your assumptions regarding the cashflow patterns.
Annie Russell, a student at Tech, plans to open a hot dog stand inside Tech’s football stadium during home games. There are seven home games scheduled for the upcoming season. She must pay the Tech athletic department a vendor’s fee of $3,000 for the season. Her stand and other equipment will cost her $4,500 for the season. She estimates that each hot dog she sells will cost her $0.35. She has talked to friends at other universities who sell hot dogs at games. Based on their information and the athletic department’s forecast that each game will sell out, she anticipates that she will sell approximately 2,000 hot dogs during each game. What price should she charge for a hot dog in order to break even?
Mrs. Tannenbaum is going to sell Christmas tree lights for $40 a box. The lights cost Mrs. Tannenbaum $10 a box and any unsold lights can be returned for a full refund. She is planning to rent a booth at the upcoming Happy Holidays Convention, which offers three options: 1. paying a fixed fee of $3,000, or 2. paying a $1,000 fee plus 10% of revenues made at the convention, or 3. paying 25% of revenues made at the convention. Which of the following statements is FALSE? Her decision will determine the risk she faces. Contribution margin will vary depending upon the option chosen. One of the options will allow Mrs. Tannebaum to break even, even if she doesn't sell any lights. Operating income will be the greatest for Option 3.
A local firm sponsors a student loan program for the children of employees.No interest is charged until graduation, and then the interest rate is 5%. Maria borrows $9000 per year, and she graduates after 4 years. Since tuition must be paid ahead of time, assume that she borrows the money at the start of each year. If Maria makes five equal annual payments, what is each payment? Use the cash flow from when she started borrowing the money to when it is all paid back, and then calculate the internal rate of return for Maria’s loan. Is this arrangement attractive to Maria?