Chapter 8, Problem 2FPC

Harold and Mavone plan to purchase furniture, appliances, some heirloom artifacts, as well as new woodworking and pottery-making equipment to furnish a renovated heritage home in Brazos de Dios, Texas, that they have recently purchased. The hobby equipment is a questionable purchase economically, since the couple plans to sell their artifacts online for a secondary retirement income. Estimates have been developed using two vendors for hobby enthusiasts that provide equipment and marketing services on contract. Note that the vendor's contract periods vary. If the hoped-for MARR is 20% per year, determine which vendor, or neither, should be selected using an incremental ROR analysis. Solve using spreadsheet functions. Vendor Hobby-Tru (H) Knack's (K) Initial cost, $ -12,000 -24,500 M&O costs, $/year –10,000 –8,500 Revenue, $/year 15,000 17,000 Resale value, $ 500 1,000 Contract life, years 3 6 The IRR of Hobby-Tru is 4 Numeric Response 1.Edit Unavailable. 4 incorrect.%. The IRR of…

Use the following information. When "trading up," it is preferable to sell your old house before buying your new house because that allows you to use the proceeds from selling your old house to buy your new house. When circumstances do not allow this, the homeowner can take out a bridge loan.Tina and Mike have sold their house, but they will not get the proceeds from the sale for an estimated 4 months. The owner of the house they want to buy will not hold the house that long. Tina and Mike have two choices: let their dream house go or take out a bridge loan. The bridge loan would be for $93,000, at 8.5% simple interest, due in 120 days. (Round your answers to the nearest cent.) a) How big of a check would they have to write in 120 days? b) How much interest would they pay for this loan?

Ali is considering the decision of whether or not to go and study a Master degree. He is currently working as an accountant in XYZ Company. He is thinking of getting a Master Degree, If he decided to study the Master Degree, he would expect to earn higher salary than his current one. On the other hand, the study of the Master Degree would force him to take unpaid leave from his current job. Furthermore, Ali recently purchased a new car. For Ali, the cost of the car is referred to as Select one: O a. Opportunity cost O b. Sunk cost O C. Differential revenue O d. Opportunity Revenue O e. Differential cost

Natalie is also thinking of buying a van that will be used only for business. The cost of the van is estimated at $36,500. Natalie would spend an additional $2,500 to have the van painted. In addition, she wants the back seat of the van removed so that she will have lots of room to transport her mixer inventory as well as her baking supplies. The cost of taking out the back seat and installing shelving units is estimated at $1,500. She expects the van to last about 5 years, and she expects to drive it for 200,000 miles. The annual cost of vehicle insurance will be $2,400. Natalie estimates that at the end of the 5-year useful life the van will sell for $7,500. Assume that she will buy the van on August 15, 2022, and it will be ready for use on September 1, 2022. Natalie is concerned about the impact of the van’s cost on her income statement and balance sheet. She has come to you for advice on calculating the van’s depreciation. Instructions (c)    What impact will the three methods of…

Phil Dunphy, a real estate agent, is considering whether he should list an unusual $393,668 house for sale.  If he lists it, he will need to spend $4,295 in advertising, staging, and fresh cookies.  The current owner has given Phil 6 months to sell the house.  If he sells it, he will receive a commission of $16,068.  If he is unable to sell the house, he will lose the listing and his expenses.  Phil estimates the probability of selling this house in 6 months to be 25%.  What is the expected profit on this listing?   Your Answer:

Suppose that your grandparents are concerned about the fact that you have been driving an old car to and from campus. They know that you have had some repairs done recently, but they fear that you will have a mechanical breakdown and then who knows what could happen?? They believe that it is time for you to purchase a new car and they want to help. For the past 40 years, Grandma has played bridge with her friend, Dorothy Miller and Dorothy’s granddaughter has recently purchased a Honda Civic. Dorothy thinks that the Honda Civic is a perfect car for a young person ---- both reliable and economical. After speaking with Dorothy, Grandma is convinced. She and Grandpa want to help you buy a new Honda Civic. They will make a $2500 down payment and they will help you with the monthly payments until you graduate. They have requested that you find out how much a Honda Civic will cost, including any special incentives. Also, Grandpa and Grandma know that you are doing very well in your Applied…

Suppose that your grandparents are concerned about the fact that you have been driving an old car to and from campus. They know that you have had some repairs done recently, but they fear that you will have a mechanical breakdown and then who knows what could happen?? They believe that it is time for you to purchase a new car and they want to help. For the past 40 years, Grandma has played bridge with her friend, Dorothy Miller and Dorothy’s granddaughter has recently purchased a Honda Civic. Dorothy thinks that the Honda Civic is a perfect car for a young person ---- both reliable and economical. After speaking with Dorothy, Grandma is convinced. She and Grandpa want to help you buy a new Honda Civic. They will make a $2500 down payment and they will help you with the monthly payments until you graduate. They have requested that you find out how much a Honda Civic will cost, including any special incentives. Also, Grandpa and Grandma know that you are doing very well in your Applied…

One of Natalie’s friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies. He is eager to buy one of Natalie’s fine European mixers, which would enable him to make larger batches of muffins and cookies. However, Curtis cannot afford to pay for the mixer for at least 30 days. He asks Natalie if she would be willing to sell him the mixer on credit. Natalie comes to you for advice. She asks the following questions. “Curtis has given me a set of his most recent financial statements. What calculations should I do with the data from these statements, and what questions should I ask him after I have analyzed the statements? How will this information help me decide if I should extend credit to Curtis?” “Is there an alternative other than extending credit to Curtis for 30 days?” “I am thinking seriously about being able to have my customers use credit cards. What are some of the advantages and disadvantages of letting my…

One of Natalie’s friends, Curtis Lesperance, runs a coffee shop where he sells specialty coffees and prepares and sells muffins and cookies. He is eager to buy one of Natalie’s fine European mixers, which would enable him to make larger batches of muffins and cookies. However, Curtis cannot afford to pay for the mixer for at least 30 days. He asks Natalie if she would be willing to sell him the mixer on credit. Natalie comes to you for advice. She asks the following questions.  “Is there an alternative other than extending credit to Curtis for 30 days?”