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icang [17]
3 years ago
9

A local car dealer offers "zero percent" interest on a $20,000 automobile for 36 monthly payments. if a customer either pays cas

h or makes other financing arrangements, there is a discount of $2,000 from the car company. professor ross, an engineering economics professor at a major university, says taking loan at 5% annual interest compounded monthly for three years from a credit union will be economically attractive considering $2,000 the rebate. is he right?
Business
2 answers:
m_a_m_a [10]3 years ago
6 0

Answer:

The professor is wrong; the buyer should directly pay the car company at zero interest.

Explanation:

Lets first list down all the facts:

There are two options for the consumer - the first being pay directly cash to the car company at 0% interest or take a loan of the same amount. The discount is the same if the buyer manages to pay in time.

36 monthly payments implies 3 year period.

Use a spreadsheet to enter the above data and calculate the values. You have to calculate the NPV (net present value) of the investment in both the scenarios taking account of the rebate and the subsequant gain/loss in each option. Most spreadsheets use the NPV function, including Numbers for Mac.

Take the case for the first option, where interest is zero. These are the values that were found out:

For each year, cash flow is approx. $6,660 that makes upto $555.55 each month. This is the required payment the buyer needs to pay to the car company each year to be eligible for a discount.

In the end, the car will cost almost $18,000.

Now take the case for loan payment which has an interest of 5%.

As quite evident, the loan actually increases the pay burden, since the buyer has to pay the full $6,660 yearly to the car company in addition to paying interest to the bank which is almost $335 each year. So the total amount every year, to the buyer's account statement will be approx. $7000, a loss of more than $300 when compared to the previous situation.

In the end, the car will cost him more than $900 (almost $20,980), due to interest adding up every year. The dsicount of $2,000 will of course reduce the price of it, to like $18,980 but that is still $900 more than the zero interest offered by the car company.

Hence, according to my calculations, the professor is wrong; the buyer should directly pay the car company at zero interest.

Musya8 [376]3 years ago
5 0

Answer:

The economics professor is wrong because the present value of the loan is $18,535, while the present value of paying for the car in cash is $18,000.

Explanation:

You have to determine the present value of an annuity, I personally like to do it on excel because it allows you to make changes and compare situations.

  • n = 36 monthly payments
  • payment = $20,000 / 36 = $555.55555 (excel doesn't require you to round numbers)
  • interest = 5% / 12 = 0.4166666% monthly

Using the NPV function =NPV(0.4167%, cells 1 - 36 $555.5555 each)

NPV = $18,535

Since you are trying to lower expenses, you must choose the lowest NPV.

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NemiM [27]

Popularly called the Land of Abundance, the szechuan(Sichuan province) benefits from good fertile land and a host of favorable natural conditions which boosts crop yield, hence being able to grow all year long.

  • The Szechuan province accounts for a large percentage of china's agricultural crop produce.

  • The temperature of the province is favorable, having a good fertile land and a humid subtropical climate.

  • Crops such as a maize, wheat, rice, corn watermelon and other fruits are grown yearly.

Therefore, The growing period of the szechuan province is longer than most other provinces In China.

Learn more : brainly.com/question/3209378?referrer=searchResults

4 0
3 years ago
______ is a place where buyer and seller meet for the purpose of exchanging, buying and selling of goods services using money as
ollegr [7]

Answer:

market

Explanation:

its the correct answer

3 0
2 years ago
During May, Bergan Company accumulated 2,500 hours of direct labor costs on Job 200 and 3,000 hours on Job 305. The total direct
alex41 [277]

Answer: Please see answers in explanation column

Explanation:

a)Total Labor Cost for Job 200 = Labor Hours  x Direct labor rate

= 2,500 x $ 28

= $ 70,000

b)Total Labor Cost for Job 305 = Labor Hours  x Direct labor rate

= 3,000  x $ 24

= $ 72,000

Labor Cost for Job 200 and Job 305 during May   = $ 70,000 + $ 72,000

= $ 142,000

Date         Account Titles and Explanation        Debit          Credit

May 31st     Work In Progress                  $142,000  

Wages Payable                                                            $  142,000

6 0
3 years ago
If an oligopoly does not cooperate and each firm chooses its own quantity, the industry will produce a quantity of output that i
Whitepunk [10]

Answer:

a. less than; more than 

Explanation:

An oligopoly is when there are few large firms operating in an industry.

A competitive industry is when there are many buyers and sellers of homogenous goods and services.

A Monopoly is when there is only one firm operating in an industry.

An oligopoly firm can choose to cooperate with other firms in the industry or not cooperate.

If firms do not cooperate they produce more goods than if they cooperated. The quantity produced can never be as much as that of a competitive firm because the number of producers in an oligopoly is less than that in a competitive firm.

The output would be more than the quantity produced by a monopoly because the number of producers in an oligopoly is more than that in a monopoly.

I hope my answer helps you.

6 0
3 years ago
If revenues are recognized only when a customer pays, what method of accounting is being used?Recognition basisAccrual-basisMatc
Dvinal [7]

Answer:

The correct answer here is Cash basis.

Explanation:

One of the methods of recording accounting transactions for income and expenses is cash basis accounting , where the transactions are only recorded when income is received in cash or expenses are paid in cash. This accounting method is not accepted by GAAP (Generally accepted accounting principle ) and IFRS ( International financial reporting standards ) because this method violates the income ( revenue ) and expense recognition principle.

3 0
2 years ago
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