Lindsay has worked for a landscaping company for the past two summers. Next year, she plans to start her own lawn care business. She has nine clients lined up and has scheduled half a day per week for each client. She plans to work for 6 months each year, from mid-April to mid-October, and wants to keep her business going for the next four years.

Lindsay will have the following costs for renting and buying the equipment she needs.

She has three options for getting a lawn tractor and trailer:

Buy used, for a purchase price of $2300, with a bank loan at 8.3%, compounded monthly, with payments of $150 per month.

Lease for $800 down and $300 per month for 6 months

Rent for $55 per day  ...don't forget about taxes!

Tools will cost $800. She plans to buy them with credit card A at 19.5%, compounded daily.

Miscellaneous materials and work clothes will cost $1700. She plans to use credit card B at 16.5%, compounded daily.

Gas for her truck will cost $200 per month.

Lindsay plans to borrow money, as necessary, to get her business started. She earned about $6000 every summer at her previous landscaping job, but she wants to make more than that with her own business.

Guiding Question:

How much should she charge each client for a summer contract, based on her costs and expected income?

(Remember, she needs to cover her costs, and make more than $6000 profit!)

In order to adequately answer the guiding question, you must first determine the following:

Calculate and compare Lindsay's options for getting a lawn tractor and trailer. Which option would you recommend? 

Lindsay will make $100 monthly payments on each credit card from mid-April to mid-October. 

(a) What will be the balance on each credit card after the first season (6 months)? 

(b) How much interest will she pay altogether over those 6 months? 

 

At the end of her first work season, Lindsay consolidated her credit card debt in a line of credit at 6.2%, compounded monthly, and then paid it off in 6 monthly payments. How much in interest did she pay after consolidating her debt? (Note: P/Y will be 12 because the payments happen monthly)

(a) What will be her costs, per season, if they are averaged out over 4 seasons? (Note: she will still need to purchase gas each month for each season.) 

(b) How much should she charge each client per season?

Answer rating: 100% (QA)

To determine which option for getting a lawn tractor and trailer Lindsay should choose we need to calculate the total cost of each option Option 1 Buy ... View the full answer