Phil Farmer just sold his farm to his nephew. The terms of the sale are that...
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Phil Farmer just sold his farm to his nephew. The terms of the sale are that the nephew will pay Phil $500/acre each year for the next 30 years. What is the equivalent sales price that Phil is receiving for his land, given in today's dollars, if his discount rate is 3%? Explain your answer, including any TVM formulas you used. 2. You are considering buying a new car from a local dealer (Dealer 1) for $35,000. Dealer 1 will finance the entire purchase price at 2% interest over 6 years. Interest is compounded monthly and you must make monthly payments. What is the most you should be willing to offer another dealer (Dealer 2) for the same car who is offering a financing plan with a 4% interest rate over 6 years? Hint: If the loan payments are the same you can assume you would be indifferent between buying from the two dealers. Explain your answer, including any TVM formulas you used. Phil Farmer just sold his farm to his nephew. The terms of the sale are that the nephew will pay Phil $500/acre each year for the next 30 years. What is the equivalent sales price that Phil is receiving for his land, given in today's dollars, if his discount rate is 3%? Explain your answer, including any TVM formulas you used. 2. You are considering buying a new car from a local dealer (Dealer 1) for $35,000. Dealer 1 will finance the entire purchase price at 2% interest over 6 years. Interest is compounded monthly and you must make monthly payments. What is the most you should be willing to offer another dealer (Dealer 2) for the same car who is offering a financing plan with a 4% interest rate over 6 years? Hint: If the loan payments are the same you can assume you would be indifferent between buying from the two dealers. Explain your answer, including any TVM formulas you used.
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Related Book For
Managerial Accounting Tools for Business Decision Making
ISBN: 978-1118033890
3rd Canadian edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso, Ibrahim M. Aly
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