You've decided to buy a house that is valued at $1 million. You have $150,000 to use as a down payment on the house, and you tak
e out a mortgage for the rest. Your bank has approved your mortgage for the balance amount of $850,000 and is offering you a standard 30-year mortgage with 8% fixed nominal interest rate (called the annual percentage rate, or APR). According to this proposal, what will be your monthly mortgage payment?
a. $6,237.
b. $8,420.
c. $9,667.
d. $7,796
a. $6,237.
b. $8,420.
c. $9,667.
d. $7,796
1 answer:
Answer:
a. $6,237.
Explanation:
We use the PMT formula i.e shown in the attachment below:
Data provided in the question
Present value = $850,000
Future value = $0
Rate of interest = 8% ÷ 12 months = 0.66666%
NPER = 30 years × 12 months = 360 months
The formula is shown below:
= PMT(Rate;NPER;-PV;FV;type)
The present value come in negative
So, after solving this, the monthly mortgage payment is $6,237
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Answer:
<u>Desing A: </u>23,024,370
<u>Desing B: </u>22,520,274.6
It should purchase desing B as the capitalized cost is lower.
Explanation:
We consider annuity for the overhauls and then, perpetuity to consider this incinerators will last indefinitely.
maintenance cost: 800,000 / 0.05 = 16,000,000
<u>Overhaul: </u>
The company will need to fund 1,250,000 every 5 years. We need to determinate the annuity to obtain this future value:
PV 1,250,000
time 5
rate 0.05
C $ $ 226,218.498
<u>Then at perpetuity:</u>
$ 226,218.498 / 0.05 = 4,524,370
<u>Desing A capitalized cost:</u>
2,500,000 + 16,000,000 + 4,524,370 = 23,024,370
We do the same for Desing B:
investment: 5,750,000
maintenance: 600,000 / 0.05 = 12,000,000
overhaul:
C $ 238,513.725
238,513.73/0.05 = 4,770,274.6
Capitalized cost: 5,750,000 + 12,000,000 + 4,770,274.6 = 22,520,274.6