A couple (which happens to be your close friends) bought a small apartment building for Php 5 million in a college town. They spent Php500,000 of their own money for the building and obtained a mortgage from a local bank for the remaining Php4.5 million. The annual mortgage payment to the bank is Php525,000. The couple also expects the annual maintenance on the building and grounds will be Php750,000. There are four apartments (two bedrooms each) in the building that can be rented for Php18,000 per month. Refer to the seven-step procedure to answer these questions: A). Does the couple have a problem? If so, what is it? B). What are their alternatives (identify at least three)? C).Estimate the economic consequences and other required data for the alternatives in Part (b). D).Select a criterion for discriminating among alternatives, and use it to advise the couple on which course of action to pursue. E). Attempt to analyze and compare the alternatives in view of at least one criterion in addition to cost. F). What should the couple do base on the information you and they have generated?
A couple (which happens to be your close friends) bought a small apartment building for Php 5 million in a college town. They spent Php500,000 of their own money for the building and obtained a mortgage from a local bank for the remaining Php4.5 million. The annual mortgage payment to the bank is Php525,000. The couple also expects the annual maintenance on the building and grounds will be Php750,000. There are four apartments (two bedrooms each) in the building that can be rented for Php18,000 per month. Refer to the seven-step procedure to answer these questions: A). Does the couple have a problem? If so, what is it? B). What are their alternatives (identify at least three)? C).Estimate the economic consequences and other required data for the alternatives in Part (b). D).Select a criterion for discriminating among alternatives, and use it to advise the couple on which course of action to pursue. E). Attempt to analyze and compare the alternatives in view of at least one criterion in addition to cost. F). What should the couple do base on the information you and they have generated?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A couple (which happens to be your close friends) bought a small apartment building for Php 5 million in a college town. They spent Php500,000 of their own money for the building and obtained a mortgage from a local bank for the remaining Php4.5 million. The annual mortgage payment to the bank is Php525,000. The couple also expects the annual maintenance on the building and grounds will be Php750,000. There are four apartments (two bedrooms each) in the building that can be rented for Php18,000 per month. Refer to the seven-step procedure to answer these questions:
A). Does the couple have a problem? If so, what is it?
B). What are their alternatives (identify at least three)?
C).Estimate the economic consequences and other required data for the alternatives in Part (b).
D).Select a criterion for discriminating among alternatives, and use it to advise the couple on which course of action to pursue.
E). Attempt to analyze and compare the alternatives in view of at least one criterion in addition to cost.
F). What should the couple do base on the information you and they have generated?
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