Determine manually by trial and error and rate of return

Assignment Help Financial Management

Reference no: EM131855655

Lucinda Lacy purchased a house today for $107,000 by making a down payment of 10% of the purchase price and paying closing costs of: Loan origination fee 1.5% of purchase price Appraisal fee $350 Survey fee 200 Attorney’s fee 400 Processing fee 300 Escrow fee 225 Other miscellaneous costs 520 Lucinda has a mortgage loan with an interest rate of 3.9% APR, compounded monthly for 30 years. Her taxes and insurance are $352 per month. Lucinda has an estimate for a $11,500 firm, fixed price contract to remodel the house and this expense will be equally distributed over the period of her ownership. After remodeling, she estimates that she could sell the house for $137,500. Her selling expenses would be 7% sales commission plus $1000. Manual Assignment 1. Determine manually, by trial and error, Lucinda’s rate of return, if she owns the house for 6 months. Show the manual calculations, including the ball-park method. Note: show ALL handwritten manual calculations (including the value of the factors) of how you got the ROR in #1. Excel Assignment 2. Prepare an Excel Amortization chart that shows the first six months payments. 3. Prepare an EXCEL spreadsheet to determine Lucinda’s rate of return if she owns the house for 6 months. 4. Use the Excel spreadsheet to determine the ROR if Lucinda keeps the house for 6 months and the selling price is $130,000 instead of $137,500. 5. Use the Excel spreadsheet to determine the ROR if the sales price is $150,000 and the repairs take longer than expected and Lucinda keeps the house for 9 months before selling and the remodeling contract is for 9 months instead of 6. Show the equations for the EXCEL program.

Reference no: EM131855655

Questions Cloud

What is estimated price of stock with dividend to be paid : What is the estimated price of a stock with a dividend to be paid in 1 year of $3.33 and a growth rate of -6%? Assume the discount rate is 10.5%

What should the price of preferred stock : What should the price of a preferred stock be if it pays a dividend of $2.52 per year and has a required rate of return of 9.9%?

Assume extra reserve payment cash goes towards loan : By how much does she shorten term of loan if she increases each payment to 135% of current value (assume extra reserve payment cash goes towards loan)

What is the dividend yield on stock : What is the dividend yield on a stock that costs $25.50, pays a dividend of $1.66 over the next year and has an expected return of 13%?

Determine manually by trial and error and rate of return : Determine manually, by trial and error, Lucinda’s rate of return, if she owns the house for 6 months.

Why do the differences in the PVs occur : Find the present value of $500 due in the future under each of these conditions: Why do the differences in the PVs occur?

Combination of projects should be accepted : If A and B are mutually exclusive and C is independent, which project, or combination of projects should be accepted?

Job security and low risk-return of their money and interst : Job security-Low risk, return of their money and interest- High prices-High Salary-Dividends or stock appreciation-Low prices

Present and future values for different interest rates : Find the following values. Compounding/discounting occurs annually. Define present value. How are present values affected by interest rates?

User Account

All Pages