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

Another question on Business

Business, 21.06.2019 21:30

Peninsula products has just applied for a loan at your bank. when reviewing peninsula's books for the year that just ended, you notice that the firm uses the fair value option for its bonds payable. you also see that the firm recorded a $55,000 debit in its bonds payable account and a $55,000 credit in its unrealized holding gain or loss"income account. over that same period, interest rates decreased by about 0.5 percent. how should this information affect the bank's decision as to whether to grant peninsula a loan? a : the bank should strongly consider giving a loan to peninsula because the changes in firm's bonds payable and unrealized holding gain or loss"income accounts suggest that peninsula has seen an increase in its credit rating over the past year. b : the bank should put little emphasis on the changes in peninsula's bonds payable and unrealized holding gain or loss"income accounts because these changes are likely the result of the rise in interest rates. c : the bank should hesitate before giving a loan to peninsula because the changes in firm's bonds payable and unrealized holding gain or loss"income accounts suggest that peninsula has seen a decline in its credit rating over the past year. d : the bank should put little emphasis on the changes in peninsula's bonds payable and unrealized holding gain or loss"income accounts because these changes are likely unrelated to either interest rates or the firm's credit rating.

Answers: 2

Answer

Business, 22.06.2019 16:30

Which of the following has the largest impact on opportunity cost

Answers: 2

Answer

Business, 22.06.2019 21:10

Krier industries has just completed its sales forecasts and its marketing department estimates that the company will sell 43,800 units during the upcoming year. in the past, management has maintained inventories of finished goods at approximately 3 months' sales. however, the estimated inventory at the start of the year of the budget period is only 7,300 units. sales occur evenly throughout the year. what is the estimated production level (units) for the first month of the upcoming budget year?

Answers: 3

Answer

Business, 23.06.2019 03:30

Jiffy printing shops does a lot of printing job for college students. the shop use an average of 25 cases of copy paper each day during the 312 days last year. the shop opens 6 days a week for 52 weeks each year and closes on sundays. each case of paper costs $35. it conducts a count of its paper inventory at the end of every quarter of the year. the table below shows the inventory counting records for last year. inventory end of quarter 1 700 cases end of quarter 2 1,050 cases end of quarter 3 920 cases end of quarter 4 800 cases 1. what's jiffy's cost of goods sold last year? 2. what's jiffy's average aggregate inventory value? 3. what's jiffy's inventory turnover last year? 4. what is the printing shop's weeks of supply last year?

Answers: 2

Answer

You know the right answer?

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

Questions