1. If you want to purchase a home. You have $25,000 to put down. All you can afford is $1500.00 per month and you do not want to finance for more than 15 years @ 4.5%. Your taxes will be $85.00 per month and insurance $60.00 a month. What is the amount you can pay for your home? (Show all your work)
2. You want to purchase a business with the following cash flows. How much would you pay for this business today? You need a 14% return to make this deal work. You will receive the cash at the end of the year?
a. First year $150,000
b. Second year $175,000
c. Third year $225,000
d. Forth year $275,000
3. How much would you pay for this business today assuming you need an 18% return to make this deal work? (Same problem as above.)
What type of a problem is this? _______________