Business, 15.02.2021 20:10 lexilove262

Should Adam Smith become a homeowner? Adam Smith completed his MBA at Eastern New Mexico University and accepted a job at Nissan North America Headquarter in Franklin, TN. Because Adam liked to have a very active social life, he decided to rent a two-bedroom condominium in downtown Nashville and commute to his job. The rent was $2,500 per month, which included parking but no utilities. Now, after one year, a similar condominium in his building has become available for sale with an asking price of $550,000. Adam likes the area, the building, and more important the unit itself, therefore he is considering buying the condominium. He knows he is not ready to settle down right now, but he is convinced that this will change in the next few years. Facing the classic buy vs rent dilemma, Adam has a long discussion with his best friend David Hume. However, it is time for Adam to make his own decision, so he comes up with several financial details he must consider.

The association fee will be $500 per month.
The property taxes will be $600 per month.
General maintenance and repairs will be $600 per year.
To purchase the unit, Adam will provide a 20% down payment.
The closing costs will be around $10,000.
Adam will finance the remaining 80% with a mortgage for 30 years. The rate will be 4%.
The down payment is currently invested and brings a 4% annual return.
If he decides to sell the home, he will pay 6% of the selling price to the realtor plus $2,000 other fees.
In order to perform a comprehensive analysis, Adam takes the following steps

Compute the monthly mortgage payment.
Compute the opportunity cost of using the required funds for closing.
Compute the total monthly cost.
Perform a scenario analysis: compute net future gains if he sells the condominium
in 2 years
in 5 years
10 years
Because he heard some rumors about Nashville’ house market being overpriced, Adam also considers a scenario analysis for future condo prices
The price drops 10% over the next 2 years, reverts to the original price by the end of year 5, then increases 10% from the original price by the end of year 10.
The price increases by 5% annually.
Follow Adam’s steps and explain what he should do.

Did Adam miss anything?
What other factors can he consider?

Answers: 2

Show answers

Other questions on the subject: Business

Business, 21.06.2019 17:20, Ddom

Your aunt is thinking about opening a hardware store. she estimates that it would cost $300,000 per year to rent the location and buy the stock. in addition, she would have to quit her $45,000 per year job as an accountant. a. define opportunity cost. b. what is your aunt's opportunity cost of running a hardware store for a year? if your aunt thought she could sell $350,000 worth of merchandise in a year, should she open the store? explain.

Answers: 2

continue

Business, 22.06.2019 12:50, lily539711

Required information problem 15-1a production costs computed and recorded; reports prepared lo c2, p1, p2, p3, p4 [the following information applies to the questions displayed below. marcelino co.'s march 31 inventory of raw materials is $84,000. raw materials purchases in april are $540,000, and factory payroll cost in april is $364,000. overhead costs incurred in april are: indirect materials, $59,000; indirect labor, $26,000; factory rent, $38,000; factory utilities, $19,000; and factory equipment depreciation, $58,000. the predetermined overhead rate is 50% of direct labor cost. job 306 is sold for $670,000 cash in april. costs of the three jobs worked on in april follow. job 306 job 307 job 308 balances on march 31 direct materials $30,000 $36,000 direct labor 25,000 14,000 applied overhead 12,500 7,000 costs during april direct materials 133,000 210,000 $100,000 direct labor 105,000 150,000 101,000 applied overhead ? ? ? status on april 30 finished (sold) finished in process (unsold) required: 1. determine the total of each production cost incurred for april (direct labor, direct materials, and applied overhead), and the total cost assigned to each job (including the balances from march 31). a-materials purchases (on credit). b-direct materials used in production. c-direct labor paid and assigned to work in process inventory. d-indirect labor paid and assigned to factory overhead. e-overhead costs applied to work in process inventory. f-actual overhead costs incurred, including indirect materials. (factory rent and utilities are paid in cash.) g-transfer of jobs 306 and 307 to finished goods inventory. h-cost of goods sold for job 306. i-revenue from the sale of job 306. j-assignment of any underapplied or overapplied overhead to the cost of goods sold account. (the amount is not material.) 2. prepare journal entries for the month of april to record the above transactions. 3. prepare a schedule of cost of goods manufactured. 4.1 compute gross profit for april. 4.2 show how to present the inventories on the april 30 balance sheet.

Answers: 3

continue

Business, 22.06.2019 17:40, libi052207

Turrubiates corporation makes a product that uses a material with the following standards standard quantity 8.0 liters per unit standard price $2.50 per liter standard cost $20.00 per unit the company budgeted for production of 3,800 units in april, but actual production was 3,900 units. the company used 32,000 liters of direct material to produce this output. the company purchased 20,100 liters of the direct material at $2.6 per liter. the direct materials purchases variance is computed when the materials are purchased. the materials quantity variance for april is:

Answers: 1

continue

Business, 22.06.2019 20:10, wtwbegay

Mikkelson corporation's stock had a required return of 12.50% last year, when the risk-free rate was 3% and the market risk premium was 4.75%. then an increase in investor risk aversion caused the market risk premium to rise by 2%. the risk-free rate and the firm's beta remain unchanged. what is the company's new required rate of return? (hint: first calculate the beta, then find the required return.) do not round your intermediate calculations.

Answers: 2

continue

You know the right answer?

Should Adam Smith become a homeowner? Adam Smith completed his MBA at Eastern New Mexico University...