Determine the sales price by calculating the present value

Assignment Help Accounting Basics

Reference no: EM13481580

Bob and Lisa must replace their old car as soon as possible. They have found a new one that meets their needs and have negotiated a price of 24,500 with the dealer. The couple wishes to buy the car by making a down payment of 2,000 and borrowing the remaining 22,500. The dealer offered to finance their purchase with terms as follows:

Loan Period 36 months
Annual Interest Rate 6%
Down Payment 2,000
LoanAmount 22,500
Monthly Payment 684.49

Bob and Lisa would agree to buy the car if the payment is nomore than 500 per month.

By increasing the the loan period the dealer presented thefacts as follows:

Loan Period 60months

Annual Interest Rate 6%

Down Payment 2,000

Monthly Payment 500

A. Determine the sales price by calculating the present value of the payments using a spreadsheet program. Present value of the monthly payments using 60 months=5 years X 12 months and monthly interest rate by dividing the annual interest rate of 6% by 12 months (0.06/12).

B. Is the dealer's behavior ethical?

C. Many types of goods are sold by sales persons who explain that the monthly payment is only a certain amount each month. Explain how an understanding of present value techniques can help consumers determine whether such a sales pitch is a fair deal.

Reference no: EM13481580

Questions Cloud

Wacky bird company a producer of fine quality clocks : wacky bird company a producer of fine quality clocks produced 5000 clocks at a cost of 1150000 in july. in august the

Delille company manufactures both traditional toothpaste : direct method and overhead ratesdelille company manufactures both traditional toothpaste and gel tooth paste with each

Prepare the supporting schedule that should accompany the : income statement itemsgain on sale of marketablesecurities.........................42000loss on sales of

Paul and paula petroceli were trying to decide whether to : paul and paula petroceli were trying to decide whether to go to the symphony or to the baseball game. they already have

Determine the sales price by calculating the present value : bob and lisa must replace their old car as soon as possible. they have found a new one that meets their needs and have

Interest is paid at the time of repaying principal and : july august september beginning cash balance 10000 ? ? add cash receipts 50000 63000 71000 deduct cash payments

Search the internet eg a companys website or secgov and : search the internet e.g. a companys website or sec.gov and find an audit report for a companys audit of internal

Prepare the investing activities statement of cash flows : income statement itemsgain on sale of marketablesecurities.........................42000loss on sales of

Determine thenbsprangenbspof annual cash inflows for each : basic sensitivity analysisnbspmurdock paints is in the process of evaluating two mutually exclusive additions to its

User Account

All Pages