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You are about to purchase your first home for personal use. The price of the house is $400K. The property taxes and casualty insurance are estimated at $200 and $100 per month respectively; these two costs are each month in your escrow. You are estimating $3,500 in closing fees and expect to get a 15 year fixed rate mortgage for a fixed 4.9% with 2 points. Assume taxes and insurance remain constant for the duration of the loan. Your PMI payment is $200/month and will be needed as long as LTV is more than or equal to 80%. The appraised value of the house is expected to rise at 2% each year (end of year). You are in a 30% tax bracket. All tax credits in a given year will be received at the end of the year. You have two options:
1) You put down $40,000 on the home (plus any points and closing fees) and take out a 360K mortgage.
2) You put down $40,000 on the home (plus any points and closing fees), borrow another $40,000 from your uncle Vini and pay this back at 10% annual effective interest rate with 4 payments on 02/30/2010, 02/30/2011, 02/30/2012, 02/30/2013 (the interest portion of 40K loan from uncle Vini is non-tax deductable). You get a 320K mortgage.
You take out the mortgage and buy the house on March 1 2009. The first payment of the mortgage is due at the beginning of April 2009. You will sell the property on April 1st 2024 (15 years later) at appraised value. MARR is 10% per year compounded monthly. What is the present cost of these transactions at March 1st 2009 under each option Should you borrow from the uncle?
AJ Pharmaceuticals would like to issue 20-year bonds to obtain the remaining funds for the new, Mexico plant. The company currently has 6.5% semiannual coupon bonds in the market that sell for $1,040 and mature in 20 years.
Butterfly Tractors had $24.00 million in sales last year. Cost of goods sold was $10.00 million, depreciation expense was $4.00 million, interest payment on outstanding debt was $3.00 million, and the firm's tax rate was 35%.
Full-time employees (40 hours per week) at the local steel mill were used to earning up to 10 hours of overtime in a two-week time period. They would typically work five overtime hours Monday through Friday and five overtime hours on the weekend.
Projects A and B are mutually exclusive. Project A costs $10,000 and is expected to generate cash inflows of $4,000 for 4 years. Project B costs $10,000 and is expected to generate a single cash flow in year 4 of $20,000.
You want to buy a new sports car from Muscle Motors for $88,000. The contract is in the form of a 48-month annuity due at a 7.75 percent APR. What will your monthly payment be
A 6.5% coupon bond with 25 years left to maturity is priced to offer a 4.5% yield to maturity. You believe that in three years, the yield to maturity will be 12%. If this occurs, what would be the total return of the bond in dollars
Use the following information to calculate the change in a company's cash balance for the year. Credit Sales = $800,000 Cash Sales = $500,000 Operating Expenses on credit = $200,000 Cash Operating Expenses = $700,000
The Weaver Watch Company sells watches for $23, the fixed costs are $100,000, and variable costs are $10 per watch. What is the firm's gain or loss at sales of 10,000 watches
Assume that in January 2010, the average house price in a particular area was $278,400. In January 2000, the average price was $195,300.
Mr. Fish wants to build a house in 8 years. He estimates that the total cost will be $150,000. If he can put aside $10,000 at the end of each year, what rate of return must he earn in order to have the amount needed
One-year Treasury bills currently earn 1.40 percent. You expect that one year from now, 1-year Treasury bill rates will increase to 1.60 percent. If the unbiased expectations theory is correct
Consider the following Preliminary cash-flow forecasts for Otobai's electric scooter project (figures are in $billions). Calculate the variable cost per unit at which the electric scooter project would break even.
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