Business, 05.05.2020 04:24 autumng7518

3. A business has taken out a $50,000 loan for a solar heating system, expecting to pay the annual payments partially from the fossil fuel savings, which currently represents $1,500/yr. plus out of pocket expenses. The loan is at a 5.0% rate, which has to be paid up by the year 2028. Assume a 3% fuel inflation rate. How much are the annual out of pocket expenses?

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Answer from: larapoghosyan91

Out of Pocket Expense = 56850.41

Explanation:

Let's start solving this question from understanding what does "Out of Pocket Money" means?

For instance, you own a bus service and customers pay you the fare only. But the costs of parking fees, tolls, and fuel are paid by the owner which are considered as "out of pocket money".

Let y be the out of pocket money in dollars.

We know that, total time period is 8 years from 2020, to 2028.

So,

Amount of loan with 5% interest rate = (Out of Pocket money + Fuel Savings) with 3% inflation rate.

50,000 x $(1+r)^{n}$ = $(y + 1500)^{(1+i)}$

where, r = interest rate = 5% = 0.05

n = time period = 8

y = Out of Pocket Money

i = inflation rate = 3% = 0.03

So,

50,000 x $(1+0.05)^{8}$ = (y + 1500) x $(1+0.03)^{8}$

We need y, so let's start solving for y:

73872.77 = (y + 1500) x (1.266)

73872.77 = 1.266y + 1900.15

73872.77 - 1900.15 = 1.266y

71972.62 = 1.266y

y = $\frac{71972.62}{1.266}$

y = 56850.41 will be the Out of Pocket Expense.

Answer from: Quest

1 all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

Answer from: Quest

Secured loans are protected by collateral security. examples: title loans where the borrower uses the car title as collateral security interest rates are lower and repayments are longer therefore risk is low as a collateral security is given as guarantee to the bank in case of failure to pay the loanunsecured loans are not protected by collateral security but it is given on the creditworthiness of the borrower, trusting that she/he will pay on time. examples; payday loans is a short term loan where the borrower lends money from the bank and pays is back when the borrower receives his/her wages.interest rates are high and repayments are shorter. but the risk is high as no collateral security is given as a guarantee to the bank for payment of the loan

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