7. You are considering switching your internet and cable providers. InDirecTV is advertising an introductory rate of $30 a month for a two-year contract. The introductory rate goes away after 6 months and the rate will raise to $75 a month after that. In addition, if you switch now, you will be entered into a drawing for a chance to be an extra in the company's next hilarious commercial. You pay $50 a month with your current provider and there's no contract. Should you switch? Use the smart decision model we learned in class. Justify your answer mathematically and include an emotional evaluation.

7. You are considering switching your internet and cable providers. InDirecTV is advertising an introductory rate of $30 a month for a two-year contract. The introductory rate goes away after 6 months and the rate will raise to $75 a month after that. In addition, if you switch now, you will be entered into a drawing for a chance to be an extra in the company's next hilarious commercial. You pay $50 a month with your current provider and there's no contract. Should you switch? Use the smart decision model we learned in class. Justify your answer mathematically and include an emotional evaluation.

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

Russ T. Steele (a AMU engineering major) is thinking of buying a brand new sport utility vehicle for $26,000 today and putting $4000 down through the trade of his existing vehicle. The vehicle loan is for 5 years at an APR of 18% because he currently has a terrible credit rating. If interest is compounded monthly and his payments are monthly, the total interest that Mr. Steele will have paid on the loan if he makes only the monthly payments (no more, no less!), will be approximately equal to a total of: O a. $11,500 O b. $19,500 O c. $15,500 O d. $17,500
2) Matt's Lemonade Stand is one of the most up and coming places to get lemonade in Amherst. I'm looking to take it public by splitting up the company into 100 shares and selling some of them. a) Suppose an inside source tells you that last summer the lemonade stand made $1,000. They expect the same for all summers in the foreseeable future. You assign a discount rate of 10% annually. What are you willing to pay for a single share given the information you've received from the inside source? (Assume throughout that the firm does not retain any of its earnings so that all earnings are paid to shareholders as dividends). b) Suppose instead that I claim the information about cashflow last summer was correct but I'm planning to expand to Northampton and Hadley so I think there will be 5% growth forever. Now what are you willing to pay for a share if your required rate of return does not change from 10%? c) You correctly point out that this growth will not be sustainable. Instead you think…
We have a new client, a start-up called Spark Software. This is their first year with us, and we must make sure they recognize their revenue properly. Spark Software offers customers an inventory management app. They charge customers up front for a one-year subscription, and customers can cancel their subscription anytime within the first 60 days to receive a full refund. Customers can renew their subscriptions each year, 2 months before the subscription expires. Spark Software so far has 3 clients. Below are the dates on which each client signed up and paid for the app, and the amount each paid (different customers get different pricing based on negotiations with the sales team): Customer A Joined: January 1, 2020 Paid: $20,000 Renewed: May 31, 2021 Paid: $10,000 Customer B Joined: March 15, 2020 Paid: $10,000 Cancelled: April 15, 2020 Customer C Joined: June 30, 2020 Paid: $10,000 Renewed: May 31, 2021 Paid: $10,000 How and when should Spark Software recognize revenue…
Target is offering no payments for 3 years on the purchase of kitchen appliances. You decide to set yourself up with a new fridge, dishwasher, stove and microwave. Total cost for your new appliances is $6,250.00 (no interest cost is incurred during the three year promotion). Your fridge tells you should start a savings account to pay for the appliances in 3 years. The fridge tells you about a bank offering a savings account earning 6.75% APR, compounded monthly. How much money would you have to deposit now in the savings account earning 6 percent APR, compounded monthly, to pay the $6,250 bill in three years? (Do not round intermediate calculations and round your final answer to 2 decimal places.) (Hint: assume no monthly payments for this question.) How much would you need to deposit in the savings account each month to be able to pay the bill when the promotion ends in 3 years? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Show…
You are considering the purchase of a Condo in downtown Toronto that you hope to operate as an Airbnb. The monthly mortgage expenses will be about $2215. You expect the cleaning cost to vary with the daily occupation, at the rate of $ 41 per day of occupation. Renting the Condo at $299 per night. How many days must your Condo be occupied if you want to make a monthly profit of $ 2221? (Please give your answer to two significant decimal figures)
Suppose that you charged $8430 on a credit card to relocate for your first job. When you realized that the interest rate for the unpaid balance was 27% compounded monthly, he decided not to charge any more on that account. You want to have this account paid off by the end of 3 years, so you arrange to have automatic payments of equal amount sent at the end of each month.(a) What monthly payment must you make to have the account paid off by the end of 3 years? (b) How much total interest will you have paid?
Jill is leasing a $32,000 car for $599/month for three years. In three years, she expects to buy it outright for $16,000 at the same time she makes her last lease payment. If it costs her 5.5% to borrow, what is the implicit rate in the lease? Should she lease or borrow the money to get the car? (Hint: use the IRR function). B. C D F G Problem 1 Start Mo. 1 Мо. 2 Мо. 3 Мо. 4 Mo. 5 Мо. 6 Мо. 7 Cash flows (37,564) 599 599 599 599 599 599 599 Borrowing cost Implicit lease cost 5.5%
Suppose you can buy a new Toyota corolla for $20000 and sell it for $12000 in third year. For simplication, assume you sell the car at the beginning of the third year but can keep driving it until the end of the third year. Alternatively you can lease the car for $300 per month for three years and return it at the end of the three years. For simplication, assume that lease payments are made yearly instead of monthly- i.e,, that they are $3600 per year and are made at the beginning of each of the three years. a. If the interest rate R is 4%, it is better to buy or lease? b. If the interest rate is 10%,it is better to buy or lease? c. At what interest rate would you be indifferent between buying and leasing the car in percent?
A company is considering getting involved in electronic commerce. A modest e-commerce package is available for $24,000. If the company wants to recover cost in 2 years, what is the equivalent amount of new income that must be received every 6 months if the interest rate is 8% per quarter? Round your answer to 2 decimal places.
An electronics retailer is offering a deferred payment plan. A customer can buy a laptop today for no money down, followed by 12 monthly payments of $145, with the first payment due in 1 year from date of purchase. If the retailer is building in a rate of return of 12% compounded monthly, what is the purchase price of the laptop that was financed?
You plan to buy the new iPhone when it is released 6 months from now. You believe it will sell for $999 dollars. You know that you will need to cut back on other expenditures to ensure you have the money ready upon release and decide to start skipping some of your daily Starbucks purchases to afford the new phone. Your usual Starbucks order costs $5. The money you save will earn an interest rate of .5% a month. How many Starbucks coffees each month do you need to sacrifice in order to have saved the $999 for your new phone?
You just bought a new TV for $2,559.72 on your credit card; assume no other purchases The APR is 18% and monthly payments. What is your monthly payment if you seek to pay off the balance at the end of 5 years from now? Round to the nearest whole number and use the $ symbol ($98 would be the form of a correct answer)

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