Should they stay in the house

Assignment Help Microeconomics
Reference no: EM132169161

Question: A couple bought their house 10 years ago for $165,000. At the time of purchase, they made a $35,000 down payment, and the balance was financed by a 30-year mortgage with monthly payments of $988.35. They expect to live in this house for 20 years, after which time they plan to sell the house and move to another state. Alternatively, they can sell the house now and live in a rental unit for the next 20 years. The house can be sold now for $210,000, from which an 8% real estate commission and $110,000 remaining loan balance and miscellaneous expenses will be deducted. If they stay in the house, the house can be sold after 20 years for $320,000 from which a 10% real estate commission and $10,000 miscellaneous expenses will be deducted. A comparable rental unit rents for $960 payable at the beginning of every month. No security deposit will be required of them to rent the unit, and the rent will not increase if they maintain a good payment record. They use an interest rate of 0.5% per month for analyzing this financial opportunity. Should they stay in the house or should they sell it and move into a rental unit?

Reference no: EM132169161

Questions Cloud

Compare the after-tax annual costs : Machine A has been completely overhauled for $9000 and is expected to last another 12 years. The $9000 was treated as an expense for tax purposes last year.
Determine whether existing tank car should be reconditioned : The Ajax Corporation purchased a railroad tank car 8 years ago for $60,000. It is being depreciated by SOYD depreciation, assuming a 10-year depreciable life.
Should the cabs be replaced if the interest rate is given : Sacramento Cab Company owns several taxis that were purchased for $25,000 each 4 years ago. The cabs' current market value is $12,000 each.
How would you describe your first impression : How would you describe your first impression; did they present in a way that was clear and coherent?
Should they stay in the house : A couple bought their house 10 years ago for $165,000. At the time of purchase, they made a $35,000 down payment, and the balance was financed.
What is the best option in the given problem : A used car can be kept for two more years and then sold for an estimated value of $3000, or it can be sold now for $7500. The average annual maintenance cost.
Purchased equipment that has a depreciable : St. John's Paper has purchased equipment that has a depreciable cost of $1 million. The equipment will be depreciated using a 5-year MACRS schedule
What is the change : Given the information above, what is the change (i.e., incremental or difference) in depreciation for Year 2?
Should the company keep the old line or replace : JMJ Inc. bought a manufacturing line 5 years ago for $35,000,000. At that time it was estimated to have a service life of 10 years and salvage value.

Reviews

Write a Review

Microeconomics Questions & Answers

  The free rider problem

Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

  Failure of the super committee is good thing for economy

Some commentators have argued that the failure of the “Super committee” is good thing for the economy?  Do you agree?

  Case study analysis about optimum resource allocation

Case study analysis about optimum resource allocation: -  Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

  Fixed cost and vairiable cost

Questions:  :   Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

  Problem - total cost, average cost, marginal cost

Problem - Total Cost, Average Cost, Marginal Cost: -  Complete the following table of costs for a firm.  (Note: enter the figures in the  MC   column  between  outputs of  0 and 1, 1 and 2, 2 and 3, etc.)

  Oligopoly and demand curve problem

Problem based on Oligopoly and demand curve,  Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?

  Impact of external costs on resource allocation

Explain the impact of external costs and external benefits on resource allocation;  Why are public goods not produced in sufficient quantities by private markets?  Which of the following are examples of public goods (or services)? Delete the incorrec..

  Shifts in demand and movements along the demand curve

Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..

  Article review question

Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

  Long-term growth, international trade & globalization

Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..

  European monetary union (emu) in crisis

"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"

  Development game “settlers of catan”

Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd