You are considering prepaying an installment loan you took out several months ago. The lender has provided you with the following information
remaining months to pay 10
loan payoff $851.29
monthly payments $95.00
balance due in last month of the loan $95.00
remaining interest on the loan $98.71
You believe you can earn an annual after-tax rate of rate of 16% on your investments in each of the next ten months (1.33% a month). Given the above information, you should
A)
prepay the loan; your net gain will be about $35.62.
B)
not prepay the loan; your net gain will be about $35.62.
C)
prepay the loan; your net gain will be about $14.80.
D)
not prepay the loan; your net gain will be about $14.80.
A
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Concrete Corporation has two producing centers, Contractor and Retailer. The Contractor Division has a variable cost of $12 for its products and a total fixed cost of $120,000. The Contractor Division also has idle capacity for up to 50,000 units per month. The Retailer Division would like to purchase 20,000 units of the Contractor Division's products per month but is unable to convince the Contractor Division to transfer units to the Retailer Division at $16 per unit. The Contractor Division has consistently argued that the market price of $20 is nonnegotiable. What is The Contractor Division's opportunity cost of not transferring units to the Retailer Division?
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