Westwood Homes is beginning work on its future College Park sub-division. Westwood is now pre-selling homes that will be ready for occupancy in nine months. Westwood is offering $5,000 off the $295,000 selling price to anyone making an immediate $130,000 down payment (with the balance due in nine months.) The alternative is a $5,000 deposit with the $290,000 balance due in nine months. Mr. and Mrs. Symbaluk are trying to decide which option to choose. They currently earn 4.8% on low-risk short-term investments.
a) What is the current economic cost of buying on the $130,000-down $5,000-off option?
b) What is the current economic cost of buying on the $5,000-deposit full-price option?
c) Which alternative should the Symbaluks choose? In current dollars, what is the economic advantage of the preferred alternative?

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The Answer of Westwood Homes is beginning work on its future College Park sub-division. Westwood is now pre-selling homes that will be ready for occupancy in nine months. Westwood is offering $5,000 off the $295,000 selling price to anyone making an immediate $130,000 down payment (with the balance due in nine months.) The alternative is a $5,000 deposit with the $290,000 balance due in nine months. Mr. and Mrs. Symbaluk are trying to decide which option to choose. They currently earn 4.8% on low-risk short-term investments.
a) What is the current economic cost of buying on the $130,000-down $5,000-off option?
b) What is the current economic cost of buying on the $5,000-deposit full-price option?
c) Which alternative should the Symbaluks choose? In current dollars, what is the economic advantage of the preferred alternative?

Westwood Homes Is Beginning Work on Its Future College Park