Outline of the case Jessica Hernandez wanted to open a retail outlet in a mall where she could sell gadgets. As her business started to grow, she realized she would soon need to hire one or two people and that will need money to pay for their compensation. In other words, she could not grow her business without borrowing. She plans to borrow $7,600 for 2 years however she doesn't have a very good credit rating so most finance companies want to charge her a high-interest rate. She finally finds a lender that will loan her the money at 12% compounded monthly. Discussion Question: 1. How much interest will Jessica have to pay to the lender? 2. If you were Jessica, will you lend money at a higher interest rate? Why? 3. What other options are available and what should she do, aside from borrowing money. 4. Assume Hernandez has successfully managed her business for several years. List five possible reasons she may still need to borrow from time to time.
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- Shonta started a graphic design firm a year ago.The business has done well, but it needs a lotmore equipment, computers, and employees tocontinue expanding. Shonta thinks she can getall the money she will need from her bank. Whatadvice might you give to her?a. She is right—the bank is likely to lend her asmuch as she needs because banks primarilyfocus on supporting small businesses.b. She is crazy—banks do not lend money tosmall businesses but only to well-known,well-established organizations.c. She should sell her business immediatelybefore it fails because most small businessesfail during the first five years.d. She should not accept any new clients sothat she can end the need to add additionalequipment and employees.e. She should consider alternative sources offinancing because banks provide only a portion of the total capital to small businesses.Excited to buy her dream car, Molly rushes into her local Jeep dealership. Molly picks out a car, sits down at the financing desk, and hears the following, “Well we ran your credit history. You’ve got a really thin file just a years worth of student loan payments. The deal you saw was for ‘well- qualified buyers.’ The best deal we can offer you is 6.6% for 60 months. A little more bad news, the cash allowance is also based on credit history, so you don’t qualify for $500. That said, you’re excited about a keep and I want to see you driving one, so I can do $400 for you. How much total interest will Molly pay using this plan? How much will Molly’s monthly payment be using the Bankrate calculator in the screen shot below?Requirement: She wants advice on stopping her business to pursue education, as she can't imagine going down both paths simultaneously. If Sky decides to continue with the business, she wants to emphasize ethics as she believes that is the best long-term approach. Any advice on this aspect of business, and her situation specifically, would be appreciated. Sky wants to rent a small retail space for $2,000 a month. Sky expects that her current sales volume would double in 2023 if she went in this direction. With either the online or storefront approach, Sky would need to invest in new machinery which could either be purchased for $10,000 or leased for $200 a month (5 year lease). The machinery is expected to last five years and Sky expects the usage to be pretty consistently annually but there would be higher usage in the summer months. She is wondering what the appropriate accounting and tax treatment for the machinery would be. If Sky were to purchase the machine outright, she could…
- Joe Latte completed a business plan and determines that it will take$120,000 to open the coffee and gelato shop. He has $30,000 of his ownmoney and will have to obtain $90,000 in loans or grants. How should Joego about getting financing? What is the probability that he can obtain agrant to start a combination coffee and Italian ice cream shop?Kash, Doll, and Tracy T are opening a new restaurant. They take out a 4.1%, 18-year, $250,000 mortgage on the building, but they do not have a lot of money because they are spending what they must to get the business started. In the future they intend to earn much more money from the success of the restaurant. Can they get a loan that will fit well with their current and future incomes? How much will they pay in interest for the loan? What are the monthly payments?Ashley Olson is early in her career and is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, she would really like to be a literary agent. She would like to go on her own in about 5 years and figures she'll need about $35,000 in capital to do so. Given that she thinks she can make about 7 percent on her money, use Worksheet 11.1 to answer the following questions. How much would Ashley have to invest today, in one lump sum, to end up with $35,000 in 5 years? Round the answer to the nearest cent. $ If she's starting from scratch, how much would she have to put away annually to accumulate the needed capital in 5 years? Round the answer to the nearest cent. $ How about if she already has $10,000 socked away; how much would she have to put away annually to accumulate the required capital in 5 years? Round the answer to the nearest cent. $ Given that Ashley has an idea of how…
- Dick and Jane (and their dog Spot) have just purchased a house and are calculating how much money they will need when the closing day rolls around. The purchase price is $250,000. They will make a 20% down payment, and they must pay 2 points on the loan. Closing costs should be 2% of the purchase price. what is the total dollar amount they will need at closing? (Show all work.)I need help creating this in Excel Jane wants to buy a new car but has decided that by the time she saves $33000 to buy the new car she wants the price of the car will have gone up. She decides to borrow the money and purchase the car today. She would like to pay off her car in four years. The local bank will loan her $33000 at 8.5% APR. Construct a loan amortization for her loan. She wants to know how much the payments will be and what the total cost of the loan is. The dealer has offered to finance her at 1% APR with a monthly payment of $250 for four years. Unfortunately the balance will be due at the end of four years. Construct a loan amortization for this loan. Jane wants to know how much she will owe at the end of the four years. You can fit them both on one spreadsheet. Upload your finished spreadsheet.Phoebe Jones is now employed as the managing editor of a well-known business journal. Although she thoroughly enjoys her job and the people she works with, what she would really like to do is open a bookstore of her own. She would like to open her store in about eight years and figures she'll need about $ 60,000 in capital to do so. Given that Phoebe thinks she can make about 8 percent on her money. How much would Phoebe have to invest today, in one lump sum, to end up with $60,000 in eight years? Round the answer to two decimal places. $_________________ If she's starting from scratch, how much would she have to put away annually to accumulate the needed capital in eight years? Round the answer to two decimal places. $ __________________ How about if she already has $20,000 socked away, how much would she have to put away annually to accumulate the required capital in eight years? Round the answer to two decimal places. $___________________ Given that Phoebe has…
- Ramona Garcia will be remodeling her kitchen before she places her home on the market to sell. She researched what three local companies would charge her for the remodeling and their best financing option for each company. Her research revealed the following results. Company Total Remodeling Cost Financing Terms Ramona is Considering Large Home Improvement Store $13,200 Financing through the bank servicing the national home improvement company: 1 year 0% financing with a minimum monthly payment of $100; 16.99% APR for the remaining 3 years Local Small Business Home Improvement Company $11,800 Financing through her local credit union: 3% origination fee to be paid first then 7.5% APR for 5 years Online Construction Business $10,200 Financing through an online banking service: $1,000 applied toward the project before payback begins then 11.9% APR for 4 years. Calculate the monthly payments for 2 of these options given that interest is compounded monthly. What…Dick and Jane have just purchased a house and are calculating how much money they will need when the closing day rolls around. The purchase price is $200,000. They will make a 20% down payment, and they must pay two points on the loan. Closing costs should be 3% of the purchase price. What is the total dollar amount they will need at closing? (Show all work.)Christy would like to improve the current ratio of her firm, which is now 0.5, so that she will have a better chance of obtaining a working capital loan. Which of the following options would improve her current ratio? a. purchase additional inventory on credit b. use cash to pay off notes payable c. collect some of her accounts receivables d. borrow short-term funds to pay off some payables