What is the net cash flow at the end of year 1

Reference no: EM13238731

You have recently moved to Hanscom AFB MA and need to make a decision between living in base housing or buying a home in the local market. Compare the following costs and benefits on an annual basis. The purchase price of the home is $250,000 and you pay $2,500 in closing costs today. You borrow the money to buy the home at a 5.5 percent annual interest rate which makes your annual house payment $12,000 (paid at the end of each year in years 1-3). Additionally, you pay $4,000/yr in utilities, $4,000/yr in taxes and house insurance, and $2,000 in maintenance and improvement projects (all cost are incurred at the end of each year). You will not incur any of these costs if you live in base housing. The annual benefits from owning the home are your housing allowance of $10,000 and tax savings of $2,000 (received at the end of each year). The opportunity cost of your best alternative investment is 7 percent, so this is your discount rate for calculating present value. You plan to sell the home at the end of the 3rd year for $240,000. The costs you will incur to sell the home at the end of the third year are a 6 percent realtor commission ($15,000), and the $193,000 remaining on the loan.

What is the net cash flow at the end of Year 1?

Reference no: EM13238731

Questions Cloud

Find the frequency of motion in hertz : The period of motion of an object-spring system is T = 0.546 s when an object of mass m = 254 g is attached to the spring, Find the frequency of motion in hertz

Determine the p-value in and interpret its meaning : Digital camers have taken over the majority of the point-and-shoot camera market. One of the important features of a camera is the battery life as measured by the number of shots taken until the battery needs to be recharged.

Explain what is frequency of chemical shift : What is frequency of chemical shift at 1.25 ppm if 400 MHz NMR spectrometer is used

What is the coefficient of friction : A 5.5- kg concrete block rests on a level table. A 3.7- kg mass is attached to the block by a string passing over a light, what is the coefficient of friction between the block and the table

What is the net cash flow at the end of year 1 : You have recently moved to Hanscom AFB MA and need to make a decision between living in base housing or buying a home in the local market. Compare the following costs and benefits on an annual basis.

Find vector a and express in terms of unit vector x : Vector A - Vector B=(-51.4m)x, Vector C=(62.2m)x, and Vector A + Vector B + Vector C=(13.8m)x, Find Vector A and express in terms of unit vector x

Explain what is the e cell for the reaction : What is the net redox reaction that occurs when Cu comes into contact with acidic K2Cr2O7? (b) What is the E cell for the reaction

Explain cscl crystallizes in a unit cell : CsCl crystallizes in a unit cell that contains the Cs+ ion at the center of a cube that has a Cl- at each corner. Each unit cell contains __________ Cs+ ions and __________ Cl-, ions, respectively.

Find how large is the total fixed costs for each firm : There are currently 10 identical firms in the perfectly competitve gadget manufacturing industry. Each firm operates in the short run with a total fixed cost of F and total variable cost of 2Q^2, where Q is the number of of gadgets produced by eac..

User Account

All Pages