You are trying to decide between two mobile phone carriers. Carrier A requires you to pay $195 for the phone and then monthly charges of $62 for 24 months. Carrier B wants you to pay $90 for the phone and monthly charges of $68 for 12 months. Assume you will keep replacing the phone after your contract expires. Your cost of capital is 4.4% APR, compounded monthly. Based on cost alone, which carrier should you choose?

You are trying to decide between two mobile phone carriers. Carrier A requires you to pay $195 for the phone and then monthly charges of $62 for 24 months. Carrier B wants you to pay $90 for the phone and monthly charges of $68 for 12 months. Assume you will keep replacing the phone after your contract expires. Your cost of capital is 4.4% APR, compounded monthly. Based on cost alone, which carrier should you choose?

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

You run a business and are considering offeringa new service. If you offer the new service, youexpect it to generate $60,000 in profits each yearfor your business over the next two years. In orderto offer the new service, you will need to take outa loan for new equipment. Assume a 5 percentannual interest rate
You are a real estate agent thinking of placing a sign advertising your services at a local bus stop. Thesign will cost $4,300 and will be posted for one year. You expect that it will generate additionalrevenue of $817 a month. What is the payback period?
You want to buy a car. A dealership in town has the SUV you want to buy for $22,510. Your first financing option is to make a down payment of $2500 and finance the rest at 2.99% APR for 72 months. How much will you be financing? $ How much will your monthly payments be under this financing option? (Round to the nearest dollar.) $ How much total money will you pay for the SUV at the end of the 72 months under this financing option? (Don't forget to include your down payment in this total amount.) $
Two plans are available for a company to obtain automobiles for its salesmen. How many miles must the cars be driven each year for the two plans to have the same costs? Use an interest rate of 10%. Plan A: Lease the cars and pay PO.52 per mile. Plan B: Purchase the cars for P9.238 and economic life of three years after which it can be sold for P2,021, Gas and oil cost PO.07 per mile. Insurance is P500 per year.
Q3
It’s time to get a new laptop. The laptop is $1,800. You could put money aside for it each month for one year. If you put the money in an account that earns 4.5%, how much will you have to save each month?Your other option is to finance it over two years paying 7.1%. How much would your monthly payment be?What are the total acquisition costs of each option?
You went to the car dealer to lease a car. The car is valued at $30,000 and you can drive away without putting any money down. The dealer offers you a 5 year lease with a $5,000 residual payment at the end if you want to buy the car. Assuming monthly payments of $508.32, what is the implied APR? Your answer should be close to a round number. Use a % symbol and round to the nearest 1 decimal point.....3.0% would be the form of a correct answer.
A database marketing firm can lease its computer equipment with beginning-of-quarter payments of $10,000 for three years. Alternatively, it can purchase the equipment for $131,200 on a loan at a rate of 9% compounded quarterly with an expected resale value after three years of $33,000. Which option would you recommend, and how much better in today's dollars is your chosen alternative?
Lola's Furniture is offering a "houseful of furniture" for $9,999. Furthermore, if you make a down payment of $999 you can wait for 1½ years to pay the $9,000 balance. If Lola's Furniture immediately sells the $9,000 receivable contract to the Barzini Finance Group at a discount rate of 18% compounded quarterly, how much money will Lola's actually receive for the "houseful of furniture"?
Suppose you are in the market for a new car worth $18,000. You are offered a deal fo make a S1,800 down payment now and to pay the balance in equal end-of-month payments of $421.85 over a 48-month period. Consider the following situations:a.Instead of going through the dealer's financing, you want to make a down payment of $1,800 and take out an auto loan from a bank at 11.75% compounded monthly. What would be your monthly payment to pay off the loan in four years?b. If you were to accept the dealers offer, what would be the effective rate of interest per month charged by the dealer on your financing?
An auto dealer has designed a marketing gimmick. They are asking their customers tinky only $109 at the end of each month, for the first two years for a car priced at $10,000. The APR on the vehicle is 5.40% and the total term of the loan is 5 years. What is the monthly payment for the remaining three years? Interest is payable during the entire five year period.
A firm can lease a truck for 5 years at a cost of $49,000 annually. It can instead buy a truck at a cost of $99,000, with annual maintenance expenses of $29,000. The truck will be sold at the end of 5 years for $39,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Answer is complete but not entirely correct. Equivalent annual cost S 35,501.30x b. Which is the better option? Buy Lease

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