Question of Engineering Economics of Case Study for practice. Kindly solve it step by step so that it can be understand properly. Kindly use interest table for solution as it is easier to understand.
CASE STUDY Decision Making MORTGAGE PAYMENTS Background The Carroltons are deliberating whether to purchase a house or continue to rent for the next 10 years. They are assured by both of their employers that no transfers to new locations will occur for at least this number of years. Plus, the high school that their children attend is very good for their college prep education, and they all like the neighborhood where they live now. They have a total of $40,000 available now and estimate that they can afford up to $2850 per month for the total house payment. If the Carroltons do not buy a house, they will continue to rent the house they currently occupy for $2800 per month. They will also place the $40,000 into an investment instrument that is expected to earn at the rate of 6% per year. Additionally, they will add to this investment at the end of each year the same amount as the monthly mortgage payments. This alternative is called the rent don't buy plan. Information The Following nancing plan using xed-rate mortgages is currently available. The details are as follows _ 15-year xed rate of 5.0% per year interest; 10% down payment Other information: 0 Price of the house is $330,000 . 0 Taxes and insurance (T&I) are $500 per month. 0 Up-front fees (origination fee, survey fee, attorney's fee, etc.) are $3000. Note : Closing cost include the amount required to initiate a deal i.e. the upfront amount. Any money not spent on the down payment or monthly payment will be invested and return at a rate of 5% per year (0.5% per month). The Carroltons anticipate selling the house after 10 years and plan for a 10% increase in price, that is, $363,000 (after all selling expenses are paid) Case Study Exercise 1. Perform economic analysis of 15-year xed- rate mortgage for decision making. Use future worth analysis for decision making, calculate the future worth of the plan. i.e Future Worth of 0 Closing cost (F1) 0 left over money from monthly payments (F2) 0 Increase in the house value when it is sold after 10 years (F3) 2. perform Analysis of rent-don't by plan. 3. What will be the total future worth of the plan if all estimates remain the same, except that when the house sells 10 years after purchase, the bottom has fallen out ofthe housing market and the net selling price is only 70% of the purchase price, that is, $231,000. Represent the economic analysis in the form of spread sheet as well( Use future worth function)
