Megan would like to purchase a house in a few years but hercredit score is not very high, she need to find a way to improveher credit score. part of her problem is that she has almost maxedout her credit cards.
Credit card 1 has balance $5100 and a credit limit of $5500
Credit card 2 has balance of $3800 and credit limit of $4000
Credit card 3 has balance of $ 3200 and credit limit of$3500.
Lowering this percentage will increase her credit score, gettingthis percentage down to less than 50% would be good. it would beeven better for her credit score if she could get this percentagedown to less than 33%.
1\\ if Megan total up her balance and come up with a plan forMegan to reduce her debt over the next couple of years. reducingher balance without reducing her credit limit will lower her debtto credit ratio, so what is the total balance or total debt onMeganâs cards? And what is her total credit limit?
2\\ calculate Meganâs debt to credit ratio as a percentage.round the nearest percent.
3\\ they decide that Megan need to reduce her debt to creditratio to 50% over the next tow years, what amount of debt would be50% of her total credit limit ? and how much she need to pay off toreach that amount?
4\\ she wonders if she will be able to reduce her debt to creditratio to 33% by the end of the third year. how much would she needto pay off in the third year to reach 33%?
Megan would like to purchase a house in a few years but hercredit score is not very high, she need to find a way to improveher credit score. part of her problem is that she has almost maxedout her credit cards.
Credit card 1 has balance $5100 and a credit limit of $5500
Credit card 2 has balance of $3800 and credit limit of $4000
Credit card 3 has balance of $ 3200 and credit limit of$3500.
Lowering this percentage will increase her credit score, gettingthis percentage down to less than 50% would be good. it would beeven better for her credit score if she could get this percentagedown to less than 33%.
1\\ if Megan total up her balance and come up with a plan forMegan to reduce her debt over the next couple of years. reducingher balance without reducing her credit limit will lower her debtto credit ratio, so what is the total balance or total debt onMeganâs cards? And what is her total credit limit?
2\\ calculate Meganâs debt to credit ratio as a percentage.round the nearest percent.
3\\ they decide that Megan need to reduce her debt to creditratio to 50% over the next tow years, what amount of debt would be50% of her total credit limit ? and how much she need to pay off toreach that amount?
4\\ she wonders if she will be able to reduce her debt to creditratio to 33% by the end of the third year. how much would she needto pay off in the third year to reach 33%?
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Question 5. Your aunt owns a small officebuilding rented to professionals (such as a dentist, psychologist,urgent care) near a college campus. She had purchased the propertyten years ago at a total cost of $530,000, which was allocatedbased relative values from an appraisal of the property as $480,000for the building and $50,000 for the land.
A reputable real estate management company wants to buy theproperty from her, but the property has been a good source of cashflow for the past ten years. Your aunt is unsure whether she shouldsell now or keep the property for 15 years and sell when sheretires. She hopes to earn a 12% rate of return no matter what shedoes.
You have gathered the following information and plan to useExcel to set up the analysis:
Alternative 1: keep the building. She has keptmeticulous records of the receipts and payments associated with theproperty, and the average annual numbers for the past ten years areas follows:
Rents collected | $140,000 | |
Less building expenditures: | ||
Custodial/maintenance services | $40,000 | |
Utilities | 25,000 | |
Depreciation on building | 16,000 | |
Property taxes and insurance | 18,000 | |
Repairs and maintenance | 9,000 | 108,000 |
Net operating income | $ 32,000 |
She also pays $12,000 a year on the mortgage (to simplify theanalysis, assume this is paid at the end of the year, rather than$1,000 monthly). The mortgage will be paid off in eight years. Shehas just painted the building inside and out at a cost of $25,000,and knows the roof will need replacing in about 5 years for aprojected cost of $20,000 and the HVAC system will be needreplacing in 7 years at a projected cost of $35,000.
She also figures she will incur an average cost increase of 5%over the average shown above for the next 5 years, and then 5%again for years 5-10, and 5% also for years 11-15. She would raisethe rents by 10% for each 5 year increment to help for theserepairs.
She has been depreciating the building over a 25-year life,using straight-line, with a expected salvage value of $80,000 forthe building.
She thinks she might be able to get $120,000 for the building in15 years since real estate prices have been steadily rising, plusthe land should have tripled in price by then.
Alternative 2. Sell the property now. The realestate management company is offering her $175,000 in cash now and$28,500 per year for the next 15 years. Because Management companyis reputable, she has confidence that they will be able to make the15 payments. The management company would take control of theproperty immediately. If your aunt sells off the property, shewould need to pay the balance on the mortgage, which is at$96,000.
Prepare an appropriate analysis to help your aunt make thedecision.
***could you please show computations
If she is not earning a 12% rate of return on keeping thebuilding, what annual rents would she have to charge to do so ineach 5-year increment?
If the real estate management company were not so reputable, howcould she sell them the property and still protect herself?
