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

A student remarks 135000000 shares of general electric were

A student remarks: "135,000,000 shares of General Electric were sold yesterday on the New York Stock Exchange, at an average price of $15 per share. That means General Electric just received a little over $2 billion from ...

1 what makes a good theory why are theories so important in

1. What makes a good theory? Why are theories so important in behavioral research? 2. What makes a theory falsifiable? What makes a theory tautological? 3. What is a research hypothesis? Why are research hypotheses, rath ...

Compute the intrinsic values time values and lower bounds

Compute the intrinsic values, time values, and lower bounds of the following calls. Identify any profit opportunities that may exist. Treat these as American options for purposes of determining the intrinsic values and t ...

1 what are the primary considerations that should be made

1. What are the primary considerations that should be made when refinancing? 2. What factors must be considered when deciding whether to refinance a loan after interest rates have declined? 3. Why might the market value ...

1 what do record date ex-dividend date and payment date

1. What do record date, ex-dividend date, and payment date mean, related to dividends? Why would you expect the price of a stock to drop by the amount of the dividend on the ex-dividend date? What rationale has been offe ...

1 under what conditions might a property with an assumable

1. Under what conditions might a property with an assumable loan sell for more than comparable properties with no assumable loans available? 2. What is meant by the incremental cost of borrowing additional funds? 3. Is t ...

Write 3-5 pages on the implementation of dodd-frank and the

Write 3-5 pages on the implementation of Dodd-Frank and the qualified mortgage rules in Dodd-Frank: specifically, concentrate on how small community banks have been treated relative to other institutions since the onset ...

Show how a combination of interest rate caps and floors can

Show how a combination of interest rate caps and floors can be equivalent to an interest rate swap ? What are the advantages and disadvantages of an interest rate collar over an interest rate cap? Explain how the Black m ...

Comprehensive problemuse what you have learned about the

Comprehensive Problem Use what you have learned about the time value of money to analyze each of the following decisions: Decision #1: Which set of Cash Flows is worth more now? Assume that your grandmother wants to give ...

Define a shear joint define an axial shear joint define

Define a shear joint? Define an axial shear joint? Define faying surface? Define friction-type joint? Define bearing-type joint? Draw a graph illustrating the way a shear joint fails? Is bolt preload important in a shear ...

  • 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

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen