A businessman plans to purchase a new house costing P 500 000. He can raise the building by issuing a 10%, 25-year-old bond that would pay P 150 000 interest per year and repay the face amount at maturity. Instead of buying the new house, he has the option of leasing it for P 140 000 per year, the first payment due one year from now. The building has an expected life for 25 years. If the interest charge for leasing is 8%, which is more favorable for the businessman, borrow and buy or lease?

A businessman plans to purchase a new house costing P 500 000. He can raise the building by issuing a 10%, 25-year-old bond that would pay P 150 000 interest per year and repay the face amount at maturity. Instead of buying the new house, he has the option of leasing it for P 140 000 per year, the first payment due one year from now. The building has an expected life for 25 years. If the interest charge for leasing is 8%, which is more favorable for the businessman, borrow and buy or lease?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

If you invest $15,000 in a long-term venture, you will receive $1,100 per year forever. The first earning is given two years after embarking on such investment Aside from the annual earnings, an additional $500 is earned every six years. Assuming your interest rate is 10% per year, what is the capitalized worth of your investment.
Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it will pay $5,280 at the end of each of the next 3 years. The opportunity requires an initial investment of $1,320 plus an additional investment at the end of the second year of $6,600. What is the NPV of this opportunity if the interest rate is 2% per year? Should Marian take it? What is the NPV of this opportunity if the interest rate is 2% per year? The NPV of this opportunity is $ (Round to the nearest cent.) .
You are trying to convince an investor into buying a rental apartment unit that fetches a rent of 10,000/mo. If the holding period is 30 years, what is the Present Value of the Annual Rent with 10% interest rate?
Simon is considering purchasing an emu, which he can graze for free in his backyard. Once the emu reaches maturity (in exactly three years), Simon will be able to sell it for $2,000. The emu costs $1,500. a. Suppose that interest rates are 8%. Calculate the net present value of the emu investment. Does the NPV indicate that Simon should buy the emu? b. Suppose that Simon passes on the emu deal, and invests $1,500o in his next-best opportunity: a safe government bond yielding 8%. Is this outcome better or worse than buying the emu? Please explain.
A real estate investor is considering the purchase of an apartment building that currently provides income of $30,000 and is expected to grow in income by 3% for the next 4 years. You would receive income from today, year 0, through year 4. At the end of year 4, they expect to sell the property for $800,000. The investor has a discount rate of 6%. How much should an investor be willing to pay for this property? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure.
Suppose you want to purchase a home for $525,000 with a 30-year mortgage at 4.84% interest. Suppose also that you can put down 30%. What are the monthly payments? (Round your answer to the nearest cent.) $ What is the total amount paid for principal and interest? (Round your answer to the nearest cent.) $ What is the amount saved if this home is financed for 15 years instead of for 30 years? (Round your answer to the nearest cent.)
Assume that you just inherited an annuity that will pay you $10,000 per year for 10 years, with the first payment being made today. A friend of your mother offers to give you $60,000 for the annuity. If you sell it, what rate of return would your mother’s friend earn on his investment? If you think a “fair” return would be 6%, how much should you ask for the annuity? What keys do I need to enter in a financial calculator to get the answers of (13.70%, $78,016.92)/ only show me the keys to enter in a financial calculaotr. not excel and not algebra
Your group receives a phone proposal to invest in a new business. Thecaller informs you that it will take a $70,000 down payment and the investmentwill return $10,000 a year for the next 10 years. He tells you that theinvestment will return 14 percent. If current interest rates are 8 percent,what is the present value of this investment? How did the caller get14 percent?
Yang is considering buying an asset that, starting 5 years from now, will pay $10,000 per year forever. Assume that the required return is 7.25%. What is the most Yang should pay for this asset?
A businessman plans to purchase a new house costing P500000. He can raise the building by issuing a 10%, 25 year old bond that would pay P150000 interest per year and repay the face amount at maturity Instead of buying the new house, he has the option of leasing it for P140000 per year, the first payment due one year fron now. The building has an expected life for 25 years, If interest charge for leasing is 8%, which is more favorable for the businessman, borrow and buy or lease?
Suppose that you invest $50,000 into a downpayment on a $250,000 house, which has a price appreciation of 3% per year. Your mortgage is fixed at $ 36,000 per year, and your tenants pay you $24,000 per year. Property taxes, maintenance, and other expenses cost $5,000 per year. Suppose that after 25 years, you sell your property. Would it have been better to invest $ 50,000 in the stock market, assuming it has returns of 9% per year over the same time period (25 years)? Why? Show your calculations and justify your answer. For the purposes of this question, suppose that inflation is zero.
Problem: Jino sold his house. In addition to cash, he took a mortgage on the house. The mortgage will be paid off by monthly payments of P12, 345 for 10 years. He decided to sell the mortgage to a local bank. The bank will buy the mortgage, but requires a 1% per month interest rate on their investment. How much will the bank pay for the mortgage?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS