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In: Finance
Rick and Stacy Stark, a married couple, are interested in purchasing their first boat. They have...
Rick and Stacy Stark, a married couple, are interested in purchasing their first boat. They have decided to borrow the boat’s purchase price of $100,000. The family is in the 28% federal income tax bracket. There are two choices for the Stark family: They can borrow the money from the boat dealer at an annual interest rate of 8%, or they could take out a $100,000 second mortgage on their home. Currently, home equity loans are at rates of 9.2%. There is no problem securing either of these two alternative financing choices. Rick and Stacy learn that if they borrow from the boat dealership, the interest will not be tax deductible. However, the interest on the second mortgage will qualify as being tax deductible on their federal income tax return. a) Calculate the after-tax cost of borrowing from the boat dealership. b) Calculate the after-tax cost of borrowing through a second mortgage on their home. c) Which source of borrowing is less costly for the Stark family?
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jeff jeffy answered 1 year agoRelated Solutions
A married couple is purchasing a home for $198,000 and gave the broker a $10,000 earnest...
A married couple is purchasing a home for $198,000 and gave the
broker a $10,000 earnest money deposit. The buyers will finance the
purchase with a new 80% loan-to-value mortgage loan. The closing
date is March 18, with the closing day charged to the buyer.
Homeowners association dues are $325 monthly and were paid in
advance by the seller. Property taxes are $2,416. Prorations should
be made using the 365-day method. The sellers will pay the 6%
brokerage fee, the...
A married couple is purchasing a home for $198,000 and gave the broker a $10,000 earnest...
A married couple is purchasing a home for $198,000 and gave the
broker a $10,000 earnest money deposit. The buyers will finance the
purchase with a new 80% loan-to-value mortgage loan.
The closing date is March 18, with the closing day charged to
the buyer. Homeowners association dues are $325 monthly and were
paid in advance by the seller. Property taxes are $2,416.
Prorations should be made using the 365-day method.
The sellers will pay the 6% brokerage fee, the...
Stacy is interested in purchasing Spud's Potato Chip Company. Spud's assets are: Adjusted Basis Fair market...
Stacy is interested in purchasing Spud's Potato Chip Company.
Spud's assets are:
Adjusted Basis
Fair market Value
Cash
2,300
2,300
Inventory
16,500
19,200
Equipment
13,000
9,000
Land
10,000
40,500
Building
66,600
129,000
Total
$108,400
$200,000
1. Prepare a table showing the basis of each asset if Stacy pays
a total of $240,000 for all the assets.
2. Prepare a table showing the basis of each asset if Stacy buys
all the stock of Spud's for $240,000.
2 part problem. The past couple of months have been hard for Doug and Stacy. Their...
2 part problem.
The past couple of months have been hard for Doug and Stacy.
Their first baby, Ryan, arrived five weeks early. Ryan stayed in
the hospital for three weeks after he was born, because there were
some issues with his lungs. Nevertheless, the doctors have assured
Doug and Stacy that he will be fine. The first month at home has
been exciting but stressful, and Doug and Stacy are just beginning
to settle into their roles as new...
A couple is purchasing a home for $300,000 and are shopping for a loan. They have...
A couple is purchasing a home for $300,000 and are shopping for
a loan. They have a total of $27,000 to put down, including the
cost of $1,000 and any loan fee that might be changed. Bank A
offers a 9% APR amortized over 30 years with 360 equal monthly
payments. There is no loan fee. Bank B offers a 8.5% APR amortized
over 30 years with 360 equal monthly payments. There is a loan 3%
loan fee (a one...
2. Purchasing a Home in Upstate New York A quantitatively savvy, young couple is interested in...
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young couple is interested in
purchasing a home in northern New York. They collected data on
26 houses that had recently sold in
the area. They want to predict the selling price of homes (in
thousands of dollars) based on the size
of the home (in square feet).
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Regression Statistics
Multiple R 0.745865819
R Square 0.55631582
Adjusted R Square...
1. A married couple decides that they will continue to have children until they have 3...
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a. What is the probability that the couple has 5 children until
they have 3 girls? (specify the variable and what distribution is
being used)
b. How many children does this couple expect to have until they
have girls? (specify the variable and what distribution is being
used)
The Pratts (a married couple) purchased their home for $400,000. They have lived in the home,...
The Pratts (a married couple) purchased their home for $400,000.
They have lived in the home, as their main residence, for six
years. While they lived at the house, the installed a new roof
costing $15,000 and added a small addition costing $25,000. At the
end of the sixth year, they sold the home for $700,000 and paid a
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Sally and Mike are a married couple. Their combined income for 2018 is $48,324. They have...
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joel and Kato are a married couple who have lived comfortably in a country in the...
joel and Kato are a married couple who have lived comfortably in
a country in the Gulf Region for the past twenty-five years; they
have accumulated some life-savings and other investments from which
they are earning good savings income and dividend income; this
income will put them well within the higher rate band of taxation
in the UK. They are considering returning to the UK, which they
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