Laura wants to buy a delivery truck. The truck costs $53,000 , and will allow her to increase her after tax profits by $39,000 per year for the next 10 years. She will borrow 72% of the cost of the truck for 10 years, at an interest rate of 7%. Laura's unlevered cost of capital is 19% and her tax rate is 39%. The loan includes a $1,000 application fee. What is the NPV of buying the truck on these terms? Please use the APV method.
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- Laura wants to buy a delivery truck. The truck costs $71,000, and will allow her to increase her after tax profits by $27,000 per year for the next 10 years. She will borrow 76% of the cost of the truck for 10 years, at an interest rate of 6%. Laura's unlevered cost of capital is 8% and her tax rate is 22%. The loan includes a $1,000 application fee. What is the NPV of buying the truck on these terms? Please use the APV method.Laura wants to buy a delivery truck. The truck costs $53,000, and will allow her to increase her after tax profits by $39,000 per year for the next 10 years. She will borrow 72% of the cost of the truck for 10 years, at an interest rate of 7%. Laura's unlevered cost of capital is 19% and her tax rate is 39%. The loan includes a $1,000 application fee. What is the NPV of buying the truck on these terms?Laura wants to buy a delivery truck. The truck costs $76,000 , and will allow her to increase her after tax profits by $14,000 per year for the next 10 years. She will borrow 82% of the cost of the truck for 10 years, at an interest rate of 6%. Laura’s unlevered cost of capital is 17% and her tax rate is 21%. The loan includes a $2,000 application fee. What is the NPV of buying the truck on these terms? Please use the APV method.
- You will need a calculator for this problem. Sanchez earns $4,000, and she wants to save it for retirement, which is 10 years away. She can either save it in a taxable account or put it into a Roth IRA. Suppose that Sanchez can receive an annual rate of return of 8 percent and her marginal tax rate is 25 percent. By the time she reaches retirement, how much money would she have in either option? [Note: Sanchez has to pay tax on the $4,000, so she cannot put the full amount either into the taxable account or the Roth IRA.]Rula has purchased a new car for $20,000. She paid $3,000 as a down payment, and she paid the remaining balance by a loan from her hometown bank. Rula will pay off the loan by equal annual installments of $10058. How many years will it take Rula to pay off the loan, given an opportunity cost of 12%? Answer:b) that his monthly house and property tax payment should not exceed 35% of his disposable monthly income. After researching the market, he determines he can obtain a 30-year home loan for 6.95% annual interest per year, compounded monthly. His monthly property tax payment will be approximately $150. What is the maximum amount he can pay for a house if his disposable monthly income is $2000? A person wants to buy a home. He has been advised A worker borrow $3500 for one year from a friend at an interest rate of 1.5% per month instead of taking a loan from a bank at a rate of 18% per year. Compare how much money the worker will save or lose on the transaction. An instrument can be bought for $10,000 cash or for d) $2000 down and payments of $750 per year for 15 years. What is the annual interest rate for the time payments? (Hint: you can assume interest rate between 4 and 5 % )
- Joe's Taco Hut can purchase a delivery truck for $20,000, for which he will take out a loan from the bank. He estimates it will generate a net income (after taxes, maintenance, and operating costs) of $4,000 per year. His other option is to go to work for someone else earning net income of $3,000 per year. Assume that Joe can resell the truck for the entire purchase price of $20,000. What is the VMP for the delivery truck (Joe's MB if he buys it)? Please enter your answer as a numerical response and do not type out your answer as words (ie. $3000 not "Three thousand dollars"). Will Joe buy the delivery truck if the interest rate is 3%? Simply type either "Yes" or "No" into the answer box Will Joe buy the delivery truck if the interest rate is 7%? Simply type either "Yes" or "No" into the answer box What is the highest interest rate Joe would be willing to pay? Please enter your answer as a numerical response and do not type your answer as words (ie. 3% not Three percent").Jordan earns an annual salary of $72,000. He is considering buying a house. His lender uses 30% of monthly gross income as a guideline for the maximum PITI (principal repayment, interest, taxes, and insurance). Assume that monthly property taxes and insurance amount to be $600. He can get a 25-year mortgage with annual interest rate of 6%. If he would like to finance 75% of the house, what is the home purchase price that he can afford?Duke was approved for a 30 year conventional loan for $250,000 at 3.65% fixed rate. He was also approved for a 15 year conventional loan for $250,000 at 3.45% fixed rate. He has $20,000 to put as a down payment. He has to pay insurance of $1400 a year and property tax of $2500 a year. Use time value of money to figure out the best options for Duke. If he looks at a house that is $150,000 how much would he pay per month with a 15 year loan?
- Jennifer has just finished high school and is deciding whether to start working or go to college. She has already been offered a job that pays $35,000 a year. Four years of college will cost $12,000 each year. She would earn an extra $20,000 each year after she graduates for the 45 years she plans on working until she retires. Assume that the interest rate is 8.5%. What is the net present value of the decision to invest in college? O $126,154 $11,508 $136,877 $12,487Loni buys a machine for her business. The machine costs $280,000. Loni estimates that the machine can produce a $64,000 cash inflow per year for the next 9 years. Loni's cost of capital is 7 percent. What is the approximate present value of the cash flow benefits for Loni?Tammy Faye requires a 12% before-tax return on her real estate investments. If she invests $78,000 cash to buy a rental townhouse that has $120 per month in taxes, insurance, and maintenance, and if she can sell the property in 5 years for $88,000, how much monthly rent must she charge to reach her target rate of return? Type your numeric answer and submit