1. Tammy Monahan is considering the purchase of a home entertainment center. The
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Question
1. Tammy Monahan is considering the purchase of a home entertainment center. The product attributes and weights she plans to consider are:
portability .1
sound projection .6
warranty .3
Tammy rated the brands as follows:
portability
sound projection
warranty
Brand A
6
8
7
Brand B
9
6
8
Brand C
5
9
6
Using the Consumer Buying Matrix presented in Chapter 8, conduct a quantitative product evaluation rating for each brand. What other factors is Tammy likely to consider when making her purchase?
2. Based on the following, calculate the costs of buying and of leasing a motor vehicle.
Purchase Costs
Leasing Costs
Down payment $1,500
Security deposit $500
Loan payment $450 for 48 months
Lease payment $450 for 36 months
Estimated value at
End of loan $4,000
End of lease charges $600
Opportunity cost interest rate: 4 percent
3. You can purchase a service contract for all of your major appliances for $180 a year. If the appliances are expected to last for 10 years, and you earn 5 percent on your savings, what would be the future value of the amount you would pay for the service contract?
4. You estimate that you can save $3,800 by selling your own home rather than using a real estate agent. What would be the future value of that amount if invested for five years at 7 percent?
5. John Walters is comparing the cost of credit to the cash price of an item. If John makes a $60 down payment, and pays $34 a month for 24 months, how much more would that be than the cash price of $695?
portability
sound projection
warranty
Brand A
6
8
7
Brand B
9
6
8
Brand C
5
9
6
Explanation / Answer
Ques1 Weights Brand A Brand A x Weight Brand B Brand B x Weight Brand c Brand C x Weight Portability 0.1 6 0.6 9 0.9 5 0.5 Sound 0.6 8 4.8 6 3.6 9 5.4 Warranty 0.3 7 2.1 8 2.4 6 1.8 Total Ratings 7.5 6.9 7.7 BRAND C SHOULD BE SELECTED DUE TO HIGHEST RATING Ques2 Calculation of PV of Cash OutFlow in Purchase Year 0 Down Payment $1,500 Year1 to 4 PV of Loan Payment $450 $19,597 Year 4 Value of Asset ($4,000) -$3,419 Total PV of Cash Outflow in Purchase $17,677 Calculation of PV of Cash OutFlow in Leasing Year 0 Down Payment $500 Year1 to 3 PV of Loan Payment $450 $14,986 Year 3 Value of Asset $600 $533 Total PV of Cash Outflow in Purchase $16,019 We should go for Leasing Due to Low Cash Outflow Ques3 Amount to be paid Each Year $180 No. of Years 10 Opportunity Intt Rate 5% Future Value of Amount* $2,264.00 * Formula = P((1+R)^n-1)/1) Ques4 Savings $3,800 Years 5 Years Rate 7% Future Value $5,329.7 Ques5 Down Payment $60 Installment $34 No. of Month 24 Total Installment $816 Total Payment in Credit (DP+Installment) $876 Payment in Cash $695 Total Savings in Cash $181
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