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Total worth of plan B.
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Explanation of Solution
Time period is 15 years. Down payment (DP) is 10%. Fixed rate (i) is 5%. Price of house (Pr) is $330,000. Fee (UF) is $3,000.
Total payment (TP) can be calculated as follows:
Total payment is $36,000.
Loan amount (LM) can be calculated as follows:
Loan payment is $297,000.
Tax and insurance (TI) is $500 per month. Interest rate per month (im) is 0.4167%
Equivalent monthly loan repayment is $2,847 per month.
The remaining money after monthly payment and down payment (ia) is deducted, earns 0.5% interest rate per month. Available amount (AV) is $40,000. Time period (n1) is 120
Future value of remaining available amount is $7,278.
The person can afford the monthly payment (MP) of $2,850. The future value of remaining monthly available amount (FM) can be calculated as follows:
The future value of remaining monthly available amount is $5.
Future value of loan balance (FB) can be calculated as follows:
Future value of loan balance is $47,083.
Selling price (SP) is $363,000. Increase in the future value of house (FH) can be calculated as follows:
Future value of house is $315,917.
Total future worth (TFW) of plan B can be calculated as follows:
Total future worth of plan B is $323,200. Total future worth of plan B is greater than plan A. Thus, select plan B.
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Chapter 4 Solutions
Engineering Economy
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