Question
Brad Brooks Part 3: 1. Refer to Brad's personal cash flow statement that you developed in Part 1.Brad has since decided to decrease his entertainment
Brad Brooks Part 3:
1. Refer to Brad's personal cash flow statement that you developed in Part 1.Brad has since decided to decrease his entertainment expenses by $200.00, give up his cell phone which saves him an additional $250.00. These savings leave Brad with $223.00 of positive monthly cash flow(incremental cash flow).Now that Brad has this additional cash flow he is considering the purchase of a new car and purchasing a new home.
Can Brad afford to:
a.Purchase the new car
b.Purchase a new condo
c.Purchase both the car and condo
2. Brad's uncle has offered to provide him with a loan for the closing costs and the down payment needed to purchase the condo.Brad exclaims, "This is great.I don't even need a loan contract!"Advise Brad on this situation.
3. What are the advantages and disadvantages to Brad of leasing rather than purchasing the car?
4. Based on the information you provided, Brad decides not to buy the condo right now. How can he save the necessary funds to purchase a condo or house in the future?(Hint: Brad can use all or a part of the incremental cash flow each month to save for the down payment and closing costs required when purchasing a home.Determine the annual cash flow available.)Calculate the time to accumulate the cash required for the down payment and closing costs using the Future Value of an annuity assuming a 10% annual rate of return.
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