Ramona Garcia will be remodeling her kitchen before she places her home on the market to sell.
Question:
Ramona Garcia will be remodeling her kitchen before she places her home on the market to sell. She researched what three local companies would charge her for the remodeling and their best financing option for each company. Her research revealed the following results.
Company | Total Remodeling Cost | Financing Terms Ramona is Considering |
---|---|---|
Large Home Improvement Store | $13,200 | Financing through the bank servicing the national home improvement company: 1 year 0% financing with a minimum monthly payment of $100; 16.99% APR for the remaining 3 years |
Local Small Business Home Improvement Company | $11,800 | Financing through her local credit union: 3% origination fee to be paid first then 7.5% APR for 5 years |
Online Construction Business | $10,200 | Financing through an online banking service: $1,000 applied toward the project before payback begins then 11.9% APR for 4 years. |
Calculate the monthly payments for 2 of these options given that interest is compounded monthly.
What is the total amount that must be paid for each of the 2 options you chose?
In the 2 options you chose, what percentage of the total amounts to be paid back to each financial institution is interest?
How would you explain to Ramona the differences between these percentages and their corresponding APRs?
Based on the financial outcomes for the 2 options you chose, which company would you suggest that Ramona choose to remodel her kitchen? Defend your suggestion.
Financial Management for Public Health and Not for Profit Organizations
ISBN: 978-0132805667
4th edition
Authors: Steven A. Finkler, Thad Calabrese