Question
Lindsay has worked for a landscaping company for the past two summers. Next year, she plans to start her own lawn care business. She has
Lindsay has worked for a landscaping company for the past two summers. Next year, she plans to start her own lawn care business. She has nine clients lined up and has scheduled half a day per week for each client. She plans to work for 6 months each year, from mid-April to mid-October, and wants to keep her business going for the next four years. Lindsay will have the following costs for renting and buying the equipment she needs. She has three options for getting a lawn tractor and trailer: I. Buy used with $5600 bank loan at 8.3%, compounded monthly, with payments of $150 per month. (She must make payments 12 months a year) II. Lease for $800 down and $400 per month for 6 months. III. Rent for $45 per day (Assume 5 days a week, 4 weeks a month) Tools will cost $1100. She will not need to replace them over the 4 years. She plans to buy them with a credit card A at 19.5%, compounded daily. Miscellaneous materials and work clothes will cost $2200. She will not need to replace them over the 4 years. She plans to use credit card B at 16.5%, compounded daily. Gas for her business truck will cost $300 per month while she is working. Lindsay plans to borrow, as necessary, to get her business started. She earned about $6000 every summer at her previous landscaping job, but she wants to make more than that with her own business. Answer the following questions in the space provided to help answer, How much should Lindsay charge each client per season?. A. Compare Lindsays options for getting a lawn tractor and a trailer. Which option would you recommend? Explain. B. Lindsay made $100 monthly payments on each credit card from mid-April to mid-October. What will be the balance on each credit card after 6 months? How much interest will she pay altogether? C. At the end of her first work season, Lindsay consolidated her credit card debt in a line of credit at 6.2%, compounded monthly, and then paid it off in 6 monthly payments. How much interest did she pay to consolidate her debt? D. Depending on your suggestion what method she chose for getting her tractor and trailer, what will her costs be, per season, if they are averaged out over 4 seasons? E. Assume Lindsay decided to buy her tractor when she started , and sold it, along with her tools, after the fourth season is over. How much equity will she have after 4 years if her tractor and trailer depreciated at 15% per year and tools depreciated at 30% per year? F. Based on her costs and expected income, how much should she charge each client per season? Explain.
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