Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

1) Smiths are researching retirement communities. They have= $2M invested in CD's earning 5%. They are Jenners Pond and Kendall Crossing. Each community needs payment of the entrance fee and monthly service fees. Entrance fee is paid in 2 instalments: 10% on October 1 2013 and 90% when they move in on March 1, 2014. They remain in cottage for 11 years at which time they move in with their son and daughter in law. The main financials for each community are given below:

Jenners Pond: Cottage entrance fee is= $400,000 Monthly service fee is= $2,900, meals= $124 per person per month. Service fees rise by 4% per year effective 10/1/xx. Refund equal to 50% of present market value of cottage is paid to vacating residents or their heirs. Market value has increased 5% for 5 out of past 11 years on alternate years. Assisted living costs= $5,000 plus present service fee minus a 20% discount for remaining cottage occupant.

Kendall crossing: cottage entrance fee is= $500,000 monthly service fee is= $4,000, meals are included. Annual rises average 3.5%. Refund of 80% of entrance fee is paid upon vacancy after eight years of residency. Assisted living costs same as independent living.

i) What is the net cash flow for Smiths after eleven years for Jenners Pond and Kendall Crossing? How would you describe difference in net cash flow?

ii) Determine the net present value of each community by using the Smith's market rate?

iii) How would your reply change if one of Smiths had to move to assisted living after eight years?

iv) Apply one other valuation method to situation.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915360

Have any Question? 


Related Questions in Basic Finance

What is a prospectuswhat are the differences among a

What is a prospectus? What are the differences among a prospectus, a registration statement, and a bond indenture?

Define and contrast stocks and bondswhat are the advantages

Define and contrast stocks and bonds. What are the advantages of owning preferred stock? What are the advantages of owning common stock?

Assignment genesis energy cash position analysisthe genesis

Assignment: Genesis Energy Cash Position Analysis The Genesis Energy operations management team is now preparing to implement the operating expansion plan. Previously, the firm's cash position did not pose a challenge. H ...

Finance and budgeting questionsq1 the following chart shows

Finance and Budgeting Questions Q1. The following chart shows revenue and cost figures for a product development effort over a five year period of time. In what year does payback occur? Year Cost Revenue 1 $30k $0 2 $20k ...

1a certain investment will pay 10000 in 20 years if the

1)A certain investment will pay $10,000 in 20 years. If the annual return on comparable investments is 8%, what is this investment currently worth? Show your work. 2)You take out a 5-year car loan for $20,000. The loan h ...

Political influence on interest rates offer an argument for

Political Influence on Interest Rates: Offer an argument for why a political regime that favors a large government will cause interest rates to be higher. Offer at least one example of why a political regime that favors ...

Consider the two economies shown in figure 31when there is

Consider the two economies shown in Figure 3.1. When there is free trade, are we sure that each country should specialize completely in producing only one of the products? For instance, perhaps each country should shift ...

The current price of gold is 1600 per troy ounce there are

The current price of gold is $1,600 per troy ounce. There are no storage costs. The risk free rate of interest is 5% continuously compounded. Please help me with the answers for all the questions. (a) What is the forward ...

Jackson corporations bonds have 19 years remaining to

Jackson Corporation's bonds have 19 years remaining to maturity. Interest is paid annually, the bonds have a $1,000 par value, and the coupon interest rate is 9.5%. The bonds have a yield to maturity of 12%. What is the ...

Suppose you just signed a purchase and sale agreement on a

Suppose you just signed a purchase and sale agreement on a new home and you have six weeks to obtain a mortgage. Interest rates have been falling, so fixed-rate loans are now very attractive. You could lock in a fixed ra ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate