Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. b. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after 10 years and the loan repaid?
Q: I would like to buy a base model Cybertruck, which costs $81,895. I pay 20% of the purchase price as…
A: A loan refers to an agreement between two parties where money is given by one party to the other on…
Q: A proposed cost-saving device has an installed cost of $780,000. The device will be used in a…
A: Pretax cost savings refer to reductions in expenses or expenditures achieved by a company before…
Q: Three employees of the Horizon Distributing Company will receive annual pension payments from the…
A: The Present Value reflects the Current value of a sum of money that will be paid or received after…
Q: Casey Nelson is a divisional manager for Pigeon Company. His annual pay raises are largely…
A: Sales = $ 3,700,000Variable expenses = 1,720,000Advertising, salaries, and other fixed out-of-pocket…
Q: Beagle Beauties engages in the development, manufacture, and sale of a li cosmetics designed to make…
A: Dividend per share$2.10Return on equity9.50%Book value per share$17.50Beta1.60Risk-free…
Q: Which formula property calculates the future value of monthly deposits of $800 lent deposit for 10…
A: Future value shows the value of the investment after a certain period at a specified rate. The…
Q: The Cullumber Inc., a manufacturer of low-sugar, low-sodium, low-cholesterol TV dinners, would like…
A: Lease option - It is an agreement that provides a renter an option to purchase the rented property…
Q: None
A: The objective of the question is to calculate the Net Present Value (NPV) of replacing the old…
Q: Guthrie Enterprises needs someone to supply it with 145,000 cartons of machine screws per year to…
A: The initial cost is $1,850,000The no. of units to supply per year is 145,000The variable cost per…
Q: Consider a three-year project with the following information: Initial fixed asset investment =…
A: Sensitivity analysis determines how different values of an independent variable affect a particular…
Q: ass stocks from a universe of large stocks throughout the world. The manager evaluated by comparing…
A: Given Data: CountryWeights in MSCI IndexManagers weightManagers return in countryReturn of stock…
Q: Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process.…
A: Capital budgeting refers to the process of analyzing various investment opportunities available to a…
Q: Sally's Shrubs has a new greenhouse project with an initial cost of $374,000 that is expected to…
A: The NPV of a project refers to the measure of the project's profitability calculated by discounting…
Q: Assume that the risk-free rate is 4% and the expected return on the market is 11.5%. What is the…
A: The Capital Asset Pricing Model (CAPM) is a tool used in finance to estimate the cost of equity,…
Q: three stocks in the following table. Pe represents price at time t and Qe represents shares…
A: Rate of return is a financial metric that measures the gain or loss of an investment relative to its…
Q: Alpha Industries is considering a project with an initial cost of $8.4 million. The project will…
A: Net present value is a capital budgeting technique used for making investment decisions.Net present…
Q: Trudy is 35 years old and is considering investing $2,000 per year in a savings account at 8%, or…
A: A Registered Retirement Savings Plan (RRSP) refers to a tax-advantaged investment account available…
Q: You've collected the following information from your favorite financial website. 52-Week Price…
A: The dividend yield shows the rate of return earned from dividend income.The dividend yield is…
Q: Consider a firm with an EBITDA of $1,100,000 and an EBIT of $1,000,000. The firm finances its assets…
A: Given Data:EBIT = 1000000Debt = 4570000Cost of Debt = 8.4%No of Equity shares = 204000Current price…
Q: Project L requires an initial outlay at t = 0 of $35,000, its expected cash inflows are $11,000 per…
A: MIRR stands for modified internal rate of returns. It is one of the capital budgeting techniques to…
Q: Expected rate of return and current yield) Time Wamer has bonds that are selling for $664. The…
A: The yield to maturity refers to the entire return that can be obtained by holding onto a certain…
Q: The value of a firm's future cash flows is estimated at 230M. The continuously compounded risk-free…
A: See the answer in the explanation field.Explanation:Answer information:Step 1:A1BC2Time 113Face…
Q: (Compound interest) To what amount will the following investments accumulate? a. $5,000…
A: (a) Amount accumulated in 10 years = $12,968.71(b) Amount accumulated in 7 years = $13,710.59(c)…
Q: Walker Machine Tools has five million shares of common stock outstanding. The current market price…
A: Earning Per Share: Earnings per share (EPS) is a financial metric calculated by dividing a company's…
Q: 32. Exactly five years from today, Prisha would like to buy an entertainment system with cash.…
A: The objective of the question is to calculate the future value of Prisha's savings account, which…
Q: Which increment should be examined first in incremental rate of return analysis, if MARR = 10.0%?…
A: Introduction:Step I : Eliminate those alternatives which have ROR less than MARR.Step II : Arrange…
Q: You plan to purchase a $240,000 house using a 30-year mortgage obtained from your local credit…
A: A mortgage is a loan borrowed for property purchase which is covered by the property itself. It is…
Q: Redan Corporation issued 20-year bonds 2 years ago at a coupon rate of 8.6 percent. The bonds make…
A: Yield to Maturity (YTM) of a bond refers to the rate of return that the bond holder will earn if he…
Q: After consulting with your financial advisor, you figured that you need $100,000 per year for your…
A: An annuity is a series of constant payment of a sum, yielding a certain rate of return.Information…
Q: Duo Corporation is evaluating a project with the following cash flows: Year Cash Flow 0 -$ 16,300 1…
A: MIRR- This is a modification of IRR and it is based on the assumption that positive cash flows are…
Q: (IRR calculation) Determine the IRR on the following projects: a. An initial outlay of $13,000…
A: Since you have posted a question with multiple sub-parts, we will solve the first three sub-parts…
Q: 9. You are looking to hedge your risk with respect to some shares of Apple stock that you own. To do…
A: The option contract is a type of derivative contract which is used for speculation and hedging of…
Q: 15.)Calculate the price of a zero - coupon bond that matures in 10 years if the market interest rate…
A: A zero coupon bond is a financial market security that does not pay any periodic payments but…
Q: What is the HHI for a market with 4 firms, each with one quarter of the market share? 1000…
A: FormulaHerfindahl Hirschman Index (HHI) = S12 + S22 Sn2 (S = Market…
Q: you've observed the following returns on Pine Computer's stock over the past five years: -29.7 cent,…
A: Relation between real and nominal rateReal and nominal rate are related with each other through the…
Q: An investment has an installed cost of $527,630. The cash flows over the four-year life of the…
A: NPV is the difference between present value of cash inflows and present value of cash outflows given…
Q: Consider the following information about three stocks: State of Economy Probability of State of…
A: Weights:Stock A: 40%Stock B: 40%Stock C: 20%
Q: Shao Industries is considering a proposed project for its capital budget. The company estimates the…
A: It is difficult to arrive at a single accurate figure of the NPV as it is affected by many factors.…
Q: Green Moose Industries is a company that produces iGadgets, among several other products. Suppose…
A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: In an attempt to improve its economy, the Erewhonian government has declared that all cash flows…
A: Internal rate of return:The internal rate of return (IRR) is a crucial financial metric used to…
Q: The Paulson Company's year-end balance sheet is shown below. Its cost of common equity is 17%, Its…
A: Given Data:Value of Debt = 1189No of shares = 576Market value per share = 4Cost of Equity = 17%Cost…
Q: For each of the following situations involving single amounts, solve for the unknown. Assume that…
A: Given Data: ParticularsPresent ValueFuture ValueRate of…
Q: 4. XYZ Corporation expects to pay dividend of $1.00 next year. The corporation forecasts that the…
A: Stock price can be defined as the sum of all future dividends discounted back to the present using…
Q: Hook Industries's capital structure consists solely of debt and common equity. It can issue debt at…
A: The objective of the question is to find out the percentage of the company's capital structure that…
Q: Sonali and Nilesh are married. On December 30th of last year, Sonali contributed $25,000 to a…
A: The objective of the question is to determine the correct tax implications for Sonali and Nilesh…
Q: The following information is provided about a stock market index m and security i: Statistic Value…
A: Beta of stock shows how much stock is volatile related to the market and how much is going to be the…
Q: As chief investment officer of a small endowment fund, you are considering expanding the fund's…
A: Risk free rate = 3.5%Expected return of current allocation = 7.16%Standard deviation of current…
Q: (a) Compare and contrast nominal, dichotomous, ordinal, and normal variables. (b) In social science…
A: The objective of the question is to understand the differences and similarities between nominal,…
Q: Find the periodic payment for each of the following scenarios, where m is the periodic deposit and r…
A: Periodic payments refer to payments that are made at regular intervals over a period of time, such…
Q: Here are the returns on two stocks. Digital Executive Cheese Fruit January +13 +6 February -2 +1…
A: As per our guidelines, we are supposed to answer only 3 sub-parts (if there are multiple sub-parts…
Step by step
Solved in 3 steps with 2 images
- A builder is offering $107, 960 loans for his properties at 9 percent for 25 years. Monthly payments are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The property would normally sell for $120,000 without any special financing. Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. b. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after 10 years and the loan repaid?A builder is offering $137,381 loans for his properties at 9 percent for 25 years. Monthly payments are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The property would normally sell for $150,000 without any special financing. Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.) b. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after 10 years and the loan repaid? Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)A builder is offering $135,534 loans for his properties at 9 percent for 25 years. Monthly payments are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The property would normally sell for $150,000 without any special financing. Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. b. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after 10 years and the loan repaid? Complete this question by entering your answers in the tabs below. Required A Required B At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? As: buyer would have the loan for the entire term of 25 years. (Do not round intermediate calculations. Round your to the nearest whole dollar…
- A builder is offering $117,767 loans for his properties at 9 percent for 25 years. Monthly payments are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The property would normally sell for $130,000 without any special financing. Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. Complete this question by entering your answers in the tabs below. Required A At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.) Sale value $ 116,134John wants to buy a property for $121,250 and wants an 80 percent loan for $97,000. A lender indicates that a fully amortizing loan can be obtained for 30 years (360 months) at 9 percent interest; however, a loan fee of $4,800 will also be necessary for John to obtain the loan. Required: a. How much will the lender actually disburse? b. What is the APR for the borrower, assuming that the mortgage is paid off after 30 years (full term)? c. If John pays off the loan after five years, what is the effective interest rate? d. Assume the lender also imposes a prepayment penalty of 2 percent of the outstanding loan balance if the loan is repaid within eight years of closing. If John repays the loan after five years with the prepayment penalty, what is the effective interest rateA borrower can obtain an 85 percent loan with an 6 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 95 percent loan at an 6.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. Required: a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 95 percent loan? c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years?
- A borrower can obtain an 80 percent loan with an 9 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 95 percent loan at an 9.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. Required: a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 95 percent loan? c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the incremental cost of borrowing the additional funds if the borrower planned to own the years? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Incremental…An investor has $60,000 to invest in a $280,000 property. He can obtain either a $220,000 loan at 9.5 percent for 20 years or a $180,000 loan at 9 percent for 20 years and a second mortgage for $40,000 at 13 percent for 20 years. All loans require monthly payments and are fully amortizing.a. Which alternative should the borrower choose, assuming he will own the property for the full loan term?b. Would your answer change if the borrower plans to own the property for only five years?c. Would your answers to (a) and (b) change if the second mortgage had a 10-year term?where a $70,000 loan could be assumed at a 9 percent rate with a remaining term of 15 years and payments of $709.99 per month. Recall that a comparable property with no special financing available would sell for $100,000 and could be financed at a market rate of 11 percent. How much more than $100,000 could the buyer pay if he or she chose to assume the 9 percent loan and still be as well off as if the property were purchased for $100,000 and financed with an 11 percent loan? We first find the present value of the payments that can be assumed using the market rate. This is the market value or cash equivalent value of the assumable loan. It represents the price at which the old loan could be sold to a new lender/investor.
- Assume that you are about to sell property (a vacant parcel of real estate) you own but otherwise have no use for. The net-of-sales- commission selling price for the property is $470,000. You are willing to finance this transaction over a 19-year period and have told the buyer that you expect a 9% pretax return on the transaction. The buyer has asked you for a payment schedule under several alternatives. Required: 1. What will be your periodic cash receipt, to earn a 9% return, if payments are received from the purchaser: NOTE: to answer the above questions, use the PMT function in Excel, as follows: PMT(rate,nper.pv.fv.type) where: rate is the interest rate for the loan, nper is the total number of payments, pv is the present value (ie.. the total amount that a series of future payments is worth now, also known as the principal), v is the future value (or a cash balance you want to attain after the last payment is made; if fvis omitted, it is assumed to be 0 (zero)), and type is the…Assume a borrower is purchasing a property for USD 100,000and faces two possible loan alternatives. A lender is willingto make an 80% first mortgage loan, or USD 80,000, for 25years at 12% interest. The same lender is willing to lend 90%, or USD 90,000, for 25 years at 13%. Both loans will have afixed interest rates and CPM. How should the borrowercompare these two alternatives?.A borrower can obtain an 80 percent loan with an 8 percent interest rate and monthly payments. The loan is to be fully amortized over 25 years. Alternatively, he could obtain a 90 percent loan at an 8.5 percent rate with the same loan term. The borrower plans to own the property for the entire loan term. a. What is the incremental cost of borrowing the additional funds? (Hint: The dollar amount of the loan does not affect the answer.) b. What is the incremental cost of borrowing the additional funds if 2 points were charged on the 90 percent loan? c. What is the incremental cost of borrowing the additional funds if the borrower planned to own the property for only five years?