Emerson developed a new style of camping trailer. He is considering a licensing agreement with Easy-Tow, who will manufacture the new trailer. They are proposing to pay him $36,000 now, and $18,000 atthe beginning of each of the eleven years of the licensing agreement, starting in two years. If interest is 5.35% compounded semi-annually, what is the agreement worth today?The agreement is worth $ today.(Round the final answer to the nearest cent as needed. Round all intermediate values to six decimal places as needed.)

Value of agreements today would be the equivalent of money today that is equivalent to the money to…

Answered: Emerson developed a new style of…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 1P

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Emerson developed a new style of camping trailer. He is considering a licensing agreement with Easy-Tow, who will manufacture the new trailer. They are proposing to pay him $38000 now, and $19000 at the beginning of each of the eleven years of the licensing agreement, starting in one year. If interest is 5.9% compounded semi-annually, what is the agreement worth today?
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 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 $500,000. You are willing to finance this transaction over a 20-year period and have told the buyer that you expect a 12% 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 12% 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 (i.e., the total amount that a series of future payments is worth now; also known as the principal), fv is the future value (or a cash balance you want to attain after the last payment is made; if fv is omitted, it is assumed to be 0 (zero)), and…
A buyer is considering purchasing a 10-acre parcel in Peoria, Arizona for economic development. The parcel has a sales price of $720,000. The buyer agrees with the seller for purchasing the property with 15% down up front and paying off the balance in 12-months. If a bank is willing to provide 3% annual interest, compounded monthly, how much should the monthly deposit be into that account to pay off the desired balance to the seller?
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After deciding to acquire a new car, you realize you can either lease the car or purchase it with a two-year loan. The car you want costs $34,000. The dealer has a leasing arrangement where you pay $97 today and $497 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APR of 6 percent. You believe that you will be able to sell the car for $22,000 in two years. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value of lease $ What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value of purchase $ What break-even resale price in two years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2…
After deciding to acquire a new car, you can either lease the car or purchase it with a three-year loan. The car you want costs $37,000. The dealer has a leasing arrangement where you pay $2,400 today and $580 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at an APR of 6 percent. You believe that you will be able to sell the car for $22,000 in three years. a. What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What break-even resale price in three years would make you indifferent between buying and leasing?
You are considering an option to purchase or rent a single residential property. You can rent it for $5,000 per month and the owner would be responsible for maintenance, property insurance, and property taxes. Alternatively, you can purchase this property for $204,500 and finance it with an 80 percent mortgage loan at 4 percent interest that will fully amortize over a 30-year period. The loan can be prepaid at any time with no penalty. You have done research in the market area and found that (1) properties have historically appreciated at an annual rate of 2 percent per year, and rents on similar properties have also increased at 2 percent annually; (2) maintenance and insurance are currently $1,545.00 each per year and they have been increasing at a rate of 3 percent per year; (3) you are in a 24 percent marginal tax rate and plan to occupy the property as your principal residence for at least four years; (4) the capital gains exclusion would apply when you sell the property; (5)…
Chuck Wells is planning to buy a Winnebago motor home. The listed price is $155,000. Chuck can get a secured add-on interest loan from his bank at 7.25% for as long as 60 months if he pays 15% down. Chuck's goal is to keep his payments below $3,600 per month and amortize the loan in 42 months. (a)Find Chuck's monthly payment (in $) with these conditions. (Round your answer to the nearest cent.) $ _______ Can he pay off the loan and keep his payments under $3,600? A. Yes, under these conditions, Chuck will meet his goal.No, the monthly B. payment is too high. (b)What are Chuck's options to get his payments closer to his goal? (Select all that apply.) A. make a lower down payment B. try to negotiate a higher interest rate C. make a higher down payment D. try to bargain for a lower sale price E. try to bargain for a higher sale price F. try to negotiate a lower interest rate (c)Chuck spoke with his bank's loan officer, who has agreed to finance the deal with a 6.95% loan…
Chuck Wells is planning to buy a Winnebago motor home. The listed price is $155,000. Chuck can get a secured add-on interest loan from his bank at 7.25% for as long as 60 months if he pays 15% down. Chuck's goal is to keep his payments below $3,600 per month and amortize the loan in 42 months. (a) Find Chuck's monthly payment (in $) with these conditions. (Round your answer to the nearest cent.) $ Can he pay off the loan and keep his payments under $3,600? O Yes, under these conditions, Chuck will meet his goal. O No, the monthly payment is too high. (b) What are Chuck's options to get his payments closer to his goal? (Select all that apply.) O make a higher down payment O make a lower down payment try to negotiate a lower interest rate try to bargain for a lower sale price O try to bargain for a higher sale price O try to negotiate a higher interest rate (c) Chuck spoke with his bank's loan officer, who has agreed to finance the deal with a 6.85% loan if Chuck can pay 20% down. What…
You are considering an option to purchase or rent a single residential property. You can rent it for $2,000 per month and the owner would be responsible for maintenance, property insurance, and property taxes. Alternatively, you can purchase this property for $200,000 and finance it with an 80 percent mortgage loan at 4 percent fixed-rate interest that will fully amortize over a 30-year period. The loan requires monthly payments. The loan can be prepaid at any time with no penalty. You have done research in the market area and found that (1) properties have historically appreciated at an annual rate of 2 percent per year, and rents on similar properties have also increased at 2 percent annually; (2) maintenance and insurance are currently $1,500.00 each per year and they have been increasing at a rate of 3 percent per year; (3) you are in a 24 percent marginal tax rate and plan to occupy the property as your principal residence for at least four years; (4) the capital gains exclusion…
A builder is offering $139,371 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 Give typing answer with explanation and conclusion

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