M-a-k-e- -a- -d-e-t-a-i-l-e-d- -s-o-l-u-t-i-o-n- -a-n-d- -e-x-p-l-a-n-a-t-i-o-n- -o-f- -h-o-w- -e-v-e-r-y- -o-f- -t-h-a-t- -a-m-o-u-n-t- -g-o-t- A. COST OF RENTING1. Annual rental costs(12 x monthly rental rate of 850)RENT - OR - BUY ANALYSIS2. Renter's insurance3. Opportunity cost of security deposit 1,000 x after-tax savings rate0.040Total costs of renting (line A.1 + line A.2 + line A.3)B. COST OF BUYING1. Annual mortgages payments (Terms: 120,000.00, 360 months 6%)(12 x monthly mortgage payment of 719)2.Property taxes(2.0% of the price of the home)3. Homeowner's insurance(0.5% of the price the of home)4. Maintenance(0.8% of the price of the home)5. After-tax cost of interest on down payment and closing costs(34,500 x 4.0% after-tax rate of return)6. Total costs (sum of lines B.1 through B.5Less:7. Principal reduction in loan balance (see note below)8. Tax savings due to interest deduction(Interest portion of mortgage payments (7,200 x tax rate 25%9. Tax savings due to property tax deductions(Line 8.2 x tax rate of 25%)10. Total deductions (sum of lines B.7 through B.9)11. Annual after-tax cost of homeownership(Line B.6-line B.1012. Estimated annual appreciation in the value of the home(2% of the price of the home)Total cost of buying (line 8.11-line B.12)10,200600408,6343,0007501,2001,3801,4341,80075010,84014,9643,98410,9803,0007,980

In rent or buy home decision we calculate the cost benefit analysis of both and…

Answered: COST OF RENTING

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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L e s s o n 7 : B u s i n e s s V a l u a t i o n a n d C o r p o r a t e R e s t r u c t u r i n g B r i e f l y d e s c r i b e e a c h o f t h e f o l l o w i n g m o t i v e s f o r m e r g i n g : g r o w t h o r d i v e r s i f i c a t i o n, s y n e r g y, f u n d r a i s i n g, i n c r e a s e d m a n a g e r i a l s k i l l o r t e c h n o l o g y, t a x c o n s i d e r a t i o n s, i n c r e a s e d o w n e r s h i p l i q u i d i t y , a n d d e f e n s e a g a i n s t t a k e o v e r.
T o p i c : B u s i n e s s V a l u a t i o n a n d C o r p o r a t e R e s t r u c t u r i n g D e f i n e a n d d i f f e r e n t i a t e a m o n g t h e m e m b e r s o f e a c h o f t h e f o l l o w i n g s e t s o f t e r m s : m e r g e r s , c o n s o l i d a t i o n s , a n d h o l d i n g c o m p a n i e s; a c q u i r i n g c o m p a n y a n d t a r g e t c o m p a n y ; f r i e n d l y m e r g e r a n d h o s t i l e m e r g e r ; a n d s t r a t e g i c m e r g e r a n d f i n a n c i a l m e r g e r.
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W h a t i s t h e c o s t o f c a p i t a l ? W h a t a r e t h e n e t p r o c e e d s f r o m t h e s a l e o f a b o n d ? W h a t a r e f l o t a t i o n c o s t s , a n d h o w d o t h e y a f f e c t a b o n d ’ s n e t p r o c e e d s ? W h a t p r e m i s e a b o u t s h a r e v a l u e u n d e r l i e s t h e c o n s t a n t - g r o w t h v al u a t i o n ( G o r d o n g r o w t h ) m o d e l t h a t i s u s e d t o m e a s u r e t h e c o s t o f c o m m o n s t o c k e q u i t y , r s ?
C a p i t a l R a i s i n g f o r C o r p o r a t i o n s D e s c r i b e t h e d i r e c t i o n a l e f f e c t ( i n c r e a s e , d e c r e a s e , o r n o e f f e c t ) o f e a c h t r a n s a c t i o n o n t h e c o m p o n e n t s o f t h e b o o k v a l u e o f c o m m o n s h a r e h o l d e r s ’ e q u i t y . E x p l a i n y o u r a n s w e r . I s s u a n c e o f $ 1 p a r v a l u e c o m m o n s t o c k a t a n a m o u n t g r e a t e r t h a n p a r v a l u e D o n a t i o n o f l a n d b y a g o v e r n m e n t a l u n i t t o a c o r p o r a t i o n C a s h d i v i d e n d d e c l a r e d 2 - f o r - 1 s t o c k s p l i t a n n o u n c e d a n d i s s u e S t o c k o p t i o n s g r a n t e d
T o p i c : I n te g r a t i o n o f A c c o u n t i n g C o n c e p t s W h a t a r e t h e r o l e s o f m a n a g e m e n t a n d t h e a u d i t o r i n t h e p r e p a r a t i o n a n d i n t e g r i t y o f t h e f i n a n c i a l s t a t e m e n t s ? W h y d o s o m e u n q u a l i f i e d o p i n i o n s h a v e e x p l a n a t o r y p a r a g r a p h s ? W i l l t h e a c c o u n t a n t e x p r e s s a n o p i n i o n o n r e v i e w e d f i n a n c i a l s t a t e m e n t s ? D e s c r i b e t h e a c co u n t a n t ’ s re p o r t f o r r e v i e w e d f i n a n ci a l s t a t e m e n t s. W h y ar e n o t e s t o s t a t e m e n t s n e c e s s a r y ? W h a t i s t he r e l a t i on s h i p b e t w e e n t h e a c c o u n t i n g e q u a t i o n a n d t h e d o u b l e- e n t r y s y s t e m o f r e c o rd i n g t r a n s a c t i o n s ?…
W-h-a-t- -r-e-l-a-t-i-o-n-s-h-i-p- -b-e-t-w-e-e-n- -t-h-e- -r-e-q-u-i-r-e-d- -r-e-t-u-r-n- -a-n-d-- t-h-e- -c-o-u-p-o-n- -i-n-t-e-r-e-s-t-- r-a-t-e- -w-i-l-l- -c-a-u-s-e- -a- -b-o-n-d- -t-o- -s-e-l-l- -a-t- -a- -d-i-s-c-o-u-n-t-?- -A-t- --a -p-r-e-m-i-u-m-?- -A-t-- i--t-s -p-a-r- -v-a-l-u-e-? I-f- -t-h-e- -r-e-q-u-i-r-e-d- -r-e-t-u-r-n- -o-n- -a- -b-o-n-d- -d-i-f-f-e-r-s- -f-r-o-m- -i-t-s- -c-o-u-p-o-n- -i-n-t-e-r-e-s-t- -r-a-t-e-,- -d-e-s-c-r-i-b-e- -t-h-e- -b-e-h-a-v-i-o-r- -o-f- -t-h-e- -b-o-n-d- -v-a-l-u-e- -o-v-e-r- -t-i-m-e- -a-s- -t-h-e- -b-o-n-d- -m-o-v-e-s- -t-o-w-a-r-d- -m-a-t-u-r-i-t-y-. A-s- -a- -r-i-s-k-a-v-e-r-s-e- -i-n-v-e-s-t-o-r, -w-o-u-l-d- -y-o-u- -p-re-f-e-r- -b-o-n-d--s -w-i-t-h- -s-h-o-r-t- -o-r- -l-o-n-g- -p-e-r-i-o-d-s-u-n-t-i-l- -m-a-t-u-r-i-t-y-?- -W-h-y-?
W h a t b a s i c p r o c e d u r e i s u s e d t o v a l u e a b o n d t h a t p a y s a n n u a l i n t e r e s t ? S e m i a n n u a l i n t e r e s t ? W h a t r el a t i o n s h i p b e t w e e n t h e r e q u i r e d r e t u r n a n d t h e c o u p o n i n t e r e s t r a t e w i l l c a u s e a b o n d t o s e l l a t a d i s c o u n t ? A t a p r e m i u m ? A t i t s p a r v a l u e ? I f t h e r e q u i r e d r e t u r n o n a b o n d d i f f e r s f r o m i t s c o u p o n i n t e r e s t r a t e , d e s c r i b e t h e b e h a v i o r o f t h e b o n d v a l u e o v e r t i m e a s t h e b o n d m o v e s t o w a r d ma t u r i t y . A s a r i s k - a v e r s e i n v e s t o r , w o u l d y o u p r e f e r b o n d s w i t h s h o r t o r l o n g p e r i o d s u n t i l m a t u r i t y ? W h y ?
bs bounnos bin g vinilob dov m ib ion l lorv dw boe vsl gid s ni libeaia परी oiesede s ob I bhos ladr IboD 10 ooll otw nogu tiadu snuwa onsdi ud abaod sdt noqu bol wang il boasoroni nalg baad nom Boo algLA on buad baega Ionod oge ert ad d w 56-9 Use the high-low method (Learning Objective 4) Brimfield Catering uses the high-low method to predict its total overhead costs. Past records show that total overhead cost was S25,600 when 860 hours were worked and $27,800 when 960 hours were worked. If Brimfield Catering has 885 hours scheduled for next month, what is the expected total overhead cost for next month?
ent II - Chapter 5 Saved Help Save & E 13 1.46853 0.68095 14 1.51259 0.66112 15 1.55797 0.64186 16 1.60471 0.62317 15.6178 10.63496 16.0863 10.95400 17.0863 11.29607 18.5989 11.93794 17.5989 11.63496 19.1569 12.29607 20.1569 12.56110 20.7616 12.93794 Monica wants to sell her share of an investment to Barney for $140,000 in 4 years. If money is wOrth 6% compounded semiannually, what would Monica accept today? Multiple Choice 110,517 $ 109.263 ( Prev 7 of 15 Next>

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