Problem:
Max Small has outstanding school loans that require a monthly payment of $1,000. He needs to purchase a new car for work and estimates that this will add $350 per month to his existing monthly obligations. Max will have $3,000 available after meeting all of his monthly living (operating) expenses. This amount could vary by plus or minus 10%.
Requirement:
Question 1: To assess the potential impact of the additional borrowing on his financial leverage, calculate the DFL in tabular form for both the current and proposed loan payments using Max's available $3,000 as a base and a 10% charge.
Question 2: Can Max afford teh additional loan payment?
Question 3: Should Max take on the additional loan payment?
Note: Provide support for rationale.