Practical Management Science
6th Edition
ISBN: 9781337406659
Author: WINSTON, Wayne L.
Publisher: Cengage,
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 4, Problem 82P
Summary Introduction
To determine: The amount of each year’s monthly payment.
Linear programming:
It is a mathematical modeling procedure where a linear function is maximized or minimized subject to certain constraints. This method is widely useful in making a quantitative analysis which is essential for making important business decisions.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Your mom will lend you money so long as you agree to pay her back within five years and you offer to pay her the rate of interest that she would otherwise get by putting his money in a saving account. Based on your earnings and living expenses, you think you will be able to pay him 8000$ in one year and then 10000$ each year for the following next four years. If your mom would otherwise earn 5% per year on her savings how much you can borrow from her?
Jerry takes out a mortgage at 5.2%. After a
few years, his payment increases and he sees
that the interest rate of his mortgage is now
6.1%. Which of these mortgage types does
Jerry most likely have?
ARM loan
home equity loan
fixed-rate loan
package mortgage
Bruin Properties is in escrow to buy a 175,000 square foot shopping center in Camarillo, California for $35,000,000. Bruin Properties can borrow $24,000,000 fixed rate fully amortizing over 30 years at a 6.0% annual interest rate with equal monthly payments of principal and interest or it can borrow $28,000,000 fixed rate fully amortizing over 30 years at a 7.0% annual interest rate with equal monthly payments of principal and interest. What is the incremental annual borrowing cost for the additional $4,000,000 loan amount if each loan would be outstanding for the full 30 year term?
a.13.0%
b.12.4%
c.11.5%
d. 7.0%
Chapter 4 Solutions
Practical Management Science
Ch. 4.2 - Prob. 1PCh. 4.2 - Prob. 2PCh. 4.2 - Prob. 3PCh. 4.2 - Prob. 4PCh. 4.2 - Prob. 5PCh. 4.2 - Prob. 6PCh. 4.3 - Prob. 7PCh. 4.3 - Prob. 8PCh. 4.3 - Prob. 9PCh. 4.3 - Prob. 10P
Ch. 4.3 - Prob. 11PCh. 4.3 - Prob. 12PCh. 4.4 - Prob. 13PCh. 4.4 - Prob. 14PCh. 4.4 - Prob. 15PCh. 4.4 - Prob. 16PCh. 4.4 - Prob. 17PCh. 4.4 - Prob. 18PCh. 4.4 - Prob. 19PCh. 4.5 - Prob. 20PCh. 4.5 - Prob. 21PCh. 4.5 - Prob. 22PCh. 4.5 - Prob. 23PCh. 4.5 - Prob. 24PCh. 4.5 - Prob. 25PCh. 4.6 - Prob. 26PCh. 4.6 - Prob. 27PCh. 4.6 - Prob. 28PCh. 4.6 - Prob. 29PCh. 4.7 - Prob. 30PCh. 4.7 - Prob. 31PCh. 4.7 - Prob. 32PCh. 4.7 - Prob. 33PCh. 4.7 - Prob. 34PCh. 4.7 - Prob. 35PCh. 4.7 - Prob. 36PCh. 4.7 - Prob. 37PCh. 4.7 - Prob. 38PCh. 4.7 - Prob. 39PCh. 4.7 - Prob. 40PCh. 4.8 - Prob. 41PCh. 4.8 - Prob. 42PCh. 4.8 - Prob. 43PCh. 4.8 - Prob. 44PCh. 4 - Prob. 45PCh. 4 - Prob. 46PCh. 4 - Prob. 47PCh. 4 - Prob. 48PCh. 4 - Prob. 49PCh. 4 - Prob. 50PCh. 4 - Prob. 51PCh. 4 - Prob. 52PCh. 4 - Prob. 53PCh. 4 - Prob. 54PCh. 4 - Prob. 55PCh. 4 - Prob. 56PCh. 4 - Prob. 57PCh. 4 - Prob. 58PCh. 4 - Prob. 59PCh. 4 - Prob. 60PCh. 4 - Prob. 61PCh. 4 - Prob. 62PCh. 4 - Prob. 63PCh. 4 - Prob. 64PCh. 4 - Prob. 65PCh. 4 - Prob. 66PCh. 4 - Prob. 67PCh. 4 - Prob. 68PCh. 4 - Prob. 69PCh. 4 - Prob. 70PCh. 4 - Prob. 71PCh. 4 - Prob. 72PCh. 4 - Prob. 73PCh. 4 - Prob. 74PCh. 4 - Prob. 75PCh. 4 - Prob. 76PCh. 4 - Prob. 77PCh. 4 - Prob. 78PCh. 4 - Prob. 79PCh. 4 - Prob. 80PCh. 4 - You want to take out a 450,000 loan on a 20-year...Ch. 4 - Prob. 82PCh. 4 - Prob. 83PCh. 4 - Prob. 84PCh. 4 - Prob. 85PCh. 4 - Prob. 86PCh. 4 - Prob. 87PCh. 4 - Prob. 88PCh. 4 - Prob. 89PCh. 4 - Prob. 90PCh. 4 - Prob. 91PCh. 4 - Prob. 92PCh. 4 - Prob. 93PCh. 4 - Prob. 94PCh. 4 - Prob. 95PCh. 4 - Prob. 96PCh. 4 - Prob. 97PCh. 4 - Prob. 98PCh. 4 - Prob. 99PCh. 4 - Prob. 100PCh. 4 - Prob. 101PCh. 4 - Prob. 102PCh. 4 - Prob. 103PCh. 4 - Prob. 104PCh. 4 - Prob. 105PCh. 4 - Prob. 106PCh. 4 - Prob. 107PCh. 4 - Prob. 108PCh. 4 - Prob. 109PCh. 4 - Prob. 110PCh. 4 - Prob. 111PCh. 4 - Prob. 112PCh. 4 - Prob. 113PCh. 4 - Prob. 114PCh. 4 - Prob. 115PCh. 4 - Prob. 116PCh. 4 - Prob. 117PCh. 4 - Prob. 118PCh. 4 - Prob. 119PCh. 4 - Prob. 120PCh. 4 - Prob. 121PCh. 4 - Prob. 122PCh. 4 - Prob. 123PCh. 4 - Prob. 124PCh. 4 - Prob. 125PCh. 4 - Prob. 126PCh. 4 - Prob. 127PCh. 4 - Prob. 128PCh. 4 - Prob. 129PCh. 4 - Prob. 130PCh. 4 - Prob. 131PCh. 4 - Prob. 132PCh. 4 - Prob. 133PCh. 4 - Prob. 134PCh. 4 - Prob. 135P
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- You are considering a 10-year investment project. At present, the expected cash flow each year is 10,000. Suppose, however, that each years cash flow is normally distributed with mean equal to last years actual cash flow and standard deviation 1000. For example, suppose that the actual cash flow in year 1 is 12,000. Then year 2 cash flow is normal with mean 12,000 and standard deviation 1000. Also, at the end of year 1, your best guess is that each later years expected cash flow will be 12,000. a. Estimate the mean and standard deviation of the NPV of this project. Assume that cash flows are discounted at a rate of 10% per year. b. Now assume that the project has an abandonment option. At the end of each year you can abandon the project for the value given in the file P11_60.xlsx. For example, suppose that year 1 cash flow is 4000. Then at the end of year 1, you expect cash flow for each remaining year to be 4000. This has an NPV of less than 62,000, so you should abandon the project and collect 62,000 at the end of year 1. Estimate the mean and standard deviation of the project with the abandonment option. How much would you pay for the abandonment option? (Hint: You can abandon a project at most once. So in year 5, for example, you abandon only if the sum of future expected NPVs is less than the year 5 abandonment value and the project has not yet been abandoned. Also, once you abandon the project, the actual cash flows for future years are zero. So in this case the future cash flows after abandonment should be zero in your model.)arrow_forwardSuppose you begin year 1 with 5000. At the beginning of each year, you put half of your money under a mattress and invest the other half in Whitewater stock. During each year, there is a 40% chance that the Whitewater stock will double, and there is a 60% chance that you will lose half of your investment. To illustrate, if the stock doubles during the first year, you will have 3750 under the mattress and 3750 invested in Whitewater during year 2. You want to estimate your annual return over a 30-year period. If you end with F dollars, your annual return is (F/5000)1/30 1. For example, if you end with 100,000, your annual return is 201/30 1 = 0.105, or 10.5%. Run 1000 replications of an appropriate simulation. Based on the results, you can be 95% certain that your annual return will be between which two values?arrow_forwardA project does not necessarily have a unique IRR. (Refer to the previous problem for more information on IRR.) Show that a project with the following cash flows has two IRRs: year 1, 20; year 2, 82; year 3, 60; year 4, 2. (Note: It can be shown that if the cash flow of a project changes sign only once, the project is guaranteed to have a unique IRR.)arrow_forward
- Why might a borrower prefer a fully amortizing loan over an adjustable-rate mortgage? О The monthly mortgage payment will remain constant throughout the term of the loan The principal and interest payment varies each month. The payment towards interest increases as the loan is amortized. The interest rate may increase over the term of the loanarrow_forwardA few years ago, Michael purchased a home for $394,000. Today, the home is worth $520,000. His remaining mortgage balance is $166,000. Assuming Michael can borrow up to 80 percent of the market value of his home, what is the maximum amount he can borrow?arrow_forwardAssume that at the beginning of the year, you purchase an investment for $5,480 that pays $138 annual income. Also assume the investment’s value has decreased to $5,080 by the end of the year. What is the rate of return for this investment?arrow_forward
- 9) Today is your 20th birthday. Your parents just gave you $5,000 that you plan to use to open a stock brokerage account. Your plan is to add $500 to the account each year on your birthday. Your first $500 contribution will come one year from now on your 21st birthday. Your 45th and final $500 contribution will occur on your 65th birthday. You plan to withdraw $5,000 from the account five years from now on your 25th birthday to take a trip to Europe. You also anticipate that you will need to withdraw $10,000 from the account 10 years from now on your 30th birthday to take a trip to Asia. You expect that the account will have an average annual return of 12 percent. How much money do you anticipate that you will have in the account on your 65th birthday, following your final contribution?arrow_forwardNippon Steel's expenses for heating and cooling a large manufacturing facility are expected to increase according to an arithmetic gradient beginning in year 2. If the cost is $550,000 this year (year 0) and will be $550,000 again in year 1, but then it is estimated to increase by $45,000 each year through year 12, what is the equivalent annual worth in years 1 to 12 of these energy costs at an interest rate of 11% per year? The equivalent annual worth is determined to be $arrow_forwardWhere a financial institution makes a loan commitment, the borrower, in drawing down on their loan commitment, causes increased cash flow needs by the DI to fund the loan commitments. There are three ways a DI can offset the effect of Asset-side liquidity risk such as drawing down of a loan commitment in all of the following sitiuations Except: a. Reduce excess cash reserves to minimum levels required to meet reserve requirements based on the decision made by management independant of regulatory requirements. b. Reduce balance sheet items such as retain earnings to the meet the minimum required capital levels. c. Taking offsetting measures such as borrowing funds or even purchasing funds on the money market. d. Reducing liquid type assets on their balance sheet such at T-bills by selling them.arrow_forward
- Use excel for this problem A trust officer at the Blacksburg National Bank needs to determine how to invest $150,000 in the following collection of bonds to maximize the annual return. Bond Annual Return Maturity Risk Tax Free A 9.5% Long High Yes B 8.0% Short Low Yes C 9.0% Long Low No D 9.0% Long High Yes E 9.0% Short High No The officer wants to invest at least 40% of the money in short-term issues and no more than 20% in high-risk issues. At least 25% of the funds should go in tax-free investments, and at least 45% of the total annual return should be tax free. Formulate the LP model for this problem. Create the spreadsheet model and use Solver to solve the problem.arrow_forwardSuppose we have a stock with the following information: Dividend Next year: $ 5.00 Dividend growth rate: 6.00% Required return: 15.00% With this growth rate, the dividend next year will be: So, the stock price today with the constant dividend growth model is: Stock price today: The constant dividend growth equation is the present value of a growing perpetuity, but we should cautio same information from above, we can calculate the stock price for various growth rates. g 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% 9.00% 10.00% Stock pricearrow_forwardThe Free Cash Flow model has the following advantage over the Dividend Growth model: In the case of variable growth, it does not require the calculation of any horizon value. It can be applied even if growth rates are unknown. It can be applied to companies with variable growth in the initial years that eventually settle down to a fixed rate of growth for the long term. It can be applied to divisions of companies. O It does not require any forecasting.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Practical Management ScienceOperations ManagementISBN:9781337406659Author:WINSTON, Wayne L.Publisher:Cengage,
Practical Management Science
Operations Management
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:Cengage,