1. Create a decision tree outlining Scott?s optons. 2. What are the costs/income associated with Scott?s decision...
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Question:
1. Create a decision tree outlining Scott?s optons.
2. What are the costs/income associated with Scott?s decision each year, over 3 years?
a. Rent inclusively (she pays only TV/Internet)
b. Rent non-inclusively (she pays TV/internet and all utlites).
c. Buy and charge rent-inclusively (assume there are not additonal closing costs)
d. Buy and charge rent-non-inclusively (assume there are not additonal closing costs)
3. What happens if the housing market is stagnant and Scott sells the house for the same price for which she bought it?
a. What happens if it depreciates by 2% each year?
4. Based on a three-year horizon, should Scott buy or rent and why?
5. If you were in Scott?s positon, what would you do?
Buy and charge rent inclusively (assume there are no additional closing costs)
?If Scott chooses to buy a home and charge inclusive rent, her expenses and income will greatly differ than if she had rented. The following charts show her yearly expenses, her profit over 3 years, and then her profit after selling her house.
?If Scott buys a house and rents it to friends for $550 per month per bedroom, she will have $59,971.51 after 3 years as shown below. When she then sells the house, and pays off her loan, her final profit will be $38,355.57 (see chart and calculations on the next page).
House sale
$240,367
Agent 5% commission fee
Already paid on house
Remaining balance
Profit over 3 years
Ending profit
Related Book For
Fundamentals of Cost Accounting
ISBN: 978-0077398194
3rd Edition
Authors: William Lanen, Shannon Anderson, Michael Maher
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