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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, leaving a half day each week for maintenance and the day to day running of the business. She plans to work for months each year, from midApril to midOctober, and wants to keep her business going for the next four years.
Lindsay plans to borrow, as necessary, to get her business started. She earned about $ every summer at her previous landscaping job, but she wants to make more than that with her own business.
Lindsay will have the following costs to run her landscape business.
She has three options for getting a lawn tractor and trailer:
a Buy used with $ bank loan at compounded monthly, with payments of $ per month. The loan must be paid monthly, regardless of if she is working or not. She is responsible for the maintenance of the equipment
b Lease for $ down and $ for months. This will be repeated for each of the years.
c Rent for $ per week assume weeks
Tools will cost $ She plans to buy them with a credit card A at compounded daily.
Miscellaneous materials and work clothes will cost $ She plans to use credit card B at compounded daily.
Gas for her work truck and her tractor will cost $ per month for the months she works, which she will pay cash.
Every year she will have other operating costs of $ which she will pay cash.
Answer the following questions showing all your workings, 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 will make $ monthly payments on each credit card from midApril to midOctober. What will be the balance on each credit card after 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 compounded monthly, and then paid it off in monthly payments. How much interest did she pay to consolidate her debt?
d For this question only, assume Lindsay chose to purchase the tractor and trailer, regardless of your choice. After four seasons, Lindsay will sell her tractor and trailer depreciated at per year and tools depreciated at per year How much equity will she have after years?
e What will her total costs be this includes tractor, tools, clothes and all other operating expenses per season, if they are averaged out over seasons?
f Based on her costs and expected income, how much should she charge each client, per month season, that is reasonable yet will exceed her previous jobs income? Explain.
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