MC Qu. 143 Pleasant Hills Properties is developing... Pleasant Hills Properties is developing a golf course subdivision that includes 225 home lots; 100 lots are golf course lots and will sell for $102,000 each; 125 are street frontage lots and will sell for $72,000. The developer acquired the land for $1,870,000 and spent another $1,470,000 on street and utilities improvement. Compute the amount of joint cost to be allocated to the street frontage lots using value basis. (Round your intermediate calculation to one decimal place.)

Apportioned joint cost to = $1,565,625.00  

Explanation:

The total joint cost is the sum of the cost of the land and the cost of street utilities.

The joint cost = $1,870,000 +  $1,470,000=  $3,340,000.00  

The total sales value of the two types of lots is equal to

(100× 102,000)   + (125× 72,000) =  19,200,000.

The apportioned joint cost to street frontage:

((125× 72,000)/19,200,000 ×  3,340,000.00   ) = $1,565,625.00  

Apportioned joint cost to = $1,565,625.00  

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of the three mortgage options that demarco and tanya have to choose from, the balloon payment mortgage would be their best option, over adjustable payment and fixed payment plans.ultimately, the balloon payment plan would save demarco and tanya overall, in interest, would cost less monthly, and they would only have to make these payments for 8 years, opposing to 30 years for adjustable or fixed payment plans. 

overall, demarco and tanya would save $80,811 if they chose balloon payments over fixed payments, and would save $116,711 if they choose balloon payments over adjustable payments. benefits with choosing fixed payments over adjustable payments is that, in the end, the payments will still be $836.30 a month, while with adjustable payments, the initial monthly payments will be $763.38 to $1082.70 a month, ultimately leading to a more costly purchase. benefits with choosing fixed payments over balloon payments are not present. benefits in choosing adjustable payments over is that it has a lower interest rate, and starts with lower monthly payments initially. benefits in choosing adjustable payments over balloon payments include a lower interest rate, and lower initial monthly payments. benefits in choosing balloon payments over fixed payments include lower interest rates, lower overall price, lower monthly payments, takes less time to pay off, and does not require a downpayment. benefits in choosing balloon payments over adjustable payments include, lower monthly payments (when averaged), takes less time to pay off, and lower overall price.

hence, option c, balloon payments, is the best option for demarco and tanya to make this purchase, for it will save them a minimum of $80811, and a maximum of $116,711.