A House Is on Sale in Markham

question 77

Multiple Choice

A house is on sale in Markham. Marlene has an option to pay $575 000 lump sum or pay $6000 at the end of every month for the next 10 years. If money earns 5% compounded monthly, which option has a better economic advantage?

• A) Paying monthly has an advantage of $9312 in PV
• B) Paying lump sum has an advantage of $9312 in PV
• C) Paying monthly has an advantage of $85 129 in PV
• D) Paying lump sum has an advantage of $85 129 in PV
• E) Both options are the same. Choose any.

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Definitions:

Activity Costs

Activity costs refer to the expenses associated with specific activities within a company, such as production, administration, or distribution, used in activity-based costing.

Setup Activity

The tasks involved in preparing equipment or processes for a new production run or activity, often considered in activity-based costing.

Process Engineer

A professional who designs, implements, controls, and optimizes industrial processes, especially continuous ones within the chemical, energy, or manufacturing sectors.

Activity-Based Costing

A costing method that assigns overhead and indirect costs to specific activities, providing a more accurate reflection of the costs incurred.