Having saved $\$ 1,000$ from her summer job, Sasha responded to an ad for "Like New! OneOwner Used Cars." A salesperson for A-$1$ Used Cars watched Sasha wander around the lot until she was attracted to a bright-red compact car. Sasha told the salesperson that this car looked just right for her. He replied, "You've made a good choice. This is an excellent car. It will give you many years of good service." Although the sticker price was $\$ 3,550$, the salesperson thought that he might be able to get Sasha a $\$ 50$ discount because she was "a nice young kid getting her first car." After conferring with the sales manager, he explained to Sasha that she could have the car for $\$ 3,500$ and that the dealer could arrange to finance the car and sell her all the necessary auto insurance. Sasha knew that she would need a loan and that auto insurance was required by law. Her excitement increased as it appeared that all her needs could be met in one stop. Sasha saw a sticker on the car's window indicating that this car came with a warranty. The salesperson told her that A-$1$ Used Cars would make any repairs to the engine for damage not caused by her misuse for $30$ days or $10,000$ miles, whichever came first. Now she felt confident about using all of her savings as a down payment. After all, what repair bills could she have with such a nice car accompanied by a terrific warranty?

Taking into account your lists, role-play Sasha's encounter with the salesperson.

David and Michele Cole were reading the newspaper after dinner one night when the phone rang. A pleasant-sounding person on the line told them that people in their community had a chance to purchase brand-new vacation homes for only $\$ 40,000$. The homes were located in a beautiful, wooded setting just two hours by car from where the Cole family lived. In order to take advantage of this low price, the seller said that the Coles had to make a $20$ percent down payment immediately. The rest of the money could be paid over the next $10$ years with no interest.

The Coles had been thinking about buying a little place away from the city for weekend escapes, and this deal seemed too good to be true. They gave the seller their credit card number for the down payment of $\$ 8,000$. The seller promised to send literature about the dream home.

What steps could the Cole family have taken initially to avoid this problem?

You and a friend are planning a summer bicycle trip across your state. You own a very old bicycle and have decided to shop for a new road bike to use on this trip. List at least five ways you would gather information before making this purchase.

Read each of the following situations in which a consumer has a problem with the seller. If the consumer has to go to court, what is the best remedy? Why? Could either of these situations result in a criminal prosecution? Explain your answers.

The Zhou family hires the Weed Out Chemical Company to spray their lawn twice a month during the spring and summer months of May, June, July, and August. Weed Out sends a monthly bill to the Zhous. By June $10$, Weed Out has not yet sprayed, although it sent a bill in May, which the Zhou family paid. Weed Out is behind schedule with its spraying with many of its customers because there is great demand for its product, which contains a successful new formula that is not yet available from other local companies.

Short Response Louise is staying on the 22 nd floor of a hotel. Her mother is staying on the $43 r d$ floor. Louise wants to visit her mother, but the elevator is temporarily out of service. Write and solve an equation to find the number of floors that Louise must climb if she takes the stairs.

Read each of the following situations in which a consumer has a problem with the seller. If the consumer has to go to court, what is the best remedy? Why? Could either of these situations result in a criminal prosecution? Explain your answers.

Jeanine takes a formal, floor-length dress that originally belonged to her mother to the local dry cleaner. When she picks up the dress, she finds several holes in it. The attendant at the dry cleaner claims the holes were there when the garment was brought in. Jeanine is certain that they are the result of the cleaning.

Having saved $\$ 1,000$ from her part-time job. Sasha responded to an ad for "Like New! OneOwner Used Cars." A salesperson for A-$1$ Used Cars watched Sasha wander around the lot until she was attracted to a bright-red compact car. Sasha told the salesperson that this car looked just right for her. He replied, "You've made a good choice. This is an excellent car. It will give you many years of good service."

Although the sticker price was $\$ 6,550$, the salesperson thought that he might be able to get Sasha a $\$ 50$ discount because she was "a nice young kid getting her first car." After conferring with the sales manager, he explained to Sasha that she could have the car for $\$ 6,500$ and that the dealer could arrange to finance the car and sell her all the necessary auto insurance.

Sasha knew that she would need a loan and that auto insurance was required by law. Her excitement increased as it appeared that all her needs could be met in one stop. Sasha saw a sticker on the car's window indicating that this car came with a warranty. The salesperson told her that A-$1$ Used Cars would make any repairs to the engine for damage not caused by her misuse for $30$ days or $10,000$ miles, whichever came first. Now she felt confident about using all of her savings as a down payment. After all, what repair bills could she have with such a nice car accompanied by a terrific warranty?

What are the advantages and disadvantages to Sasha of obtaining financing and insurance from the dealer?

Linda bought a washer and dryer from Millpage Laundry Supplies for y dollars. She signed an installment agreement requiring a 15% down payment and monthly payments of x dollars for one year. Express the total amount Linda pays for the washer and dryer on the installment plan algebraically.

Having saved $\$ 1,000$ from her part-time job. Sasha responded to an ad for "Like New! OneOwner Used Cars." A salesperson for A-$1$ Used Cars watched Sasha wander around the lot until she was attracted to a bright-red compact car. Sasha told the salesperson that this car looked just right for her. He replied, "You've made a good choice. This is an excellent car. It will give you many years of good service."

Although the sticker price was $\$ 6,550$, the salesperson thought that he might be able to get Sasha a $\$ 50$ discount because she was "a nice young kid getting her first car." After conferring with the sales manager, he explained to Sasha that she could have the car for $\$ 6,500$ and that the dealer could arrange to finance the car and sell her all the necessary auto insurance.

Sasha knew that she would need a loan and that auto insurance was required by law. Her excitement increased as it appeared that all her needs could be met in one stop. Sasha saw a sticker on the car's window indicating that this car came with a warranty. The salesperson told her that A-$1$ Used Cars would make any repairs to the engine for damage not caused by her misuse for $30$ days or $10,000$ miles, whichever came first. Now she felt confident about using all of her savings as a down payment. After all, what repair bills could she have with such a nice car accompanied by a terrific warranty?

What promises, if any, did the seller make to her? Did he say anything that could be considered puffing? If so, what?

Linda wants to buy a new washing machine. The sales clerk at The Washer Mart tells Linda, "This washing machine is a good buy-only $\$ 500$. But don't worry if you don't have the cash. I can arrange easy credit for you; only $\$ 50$ down and $\$ 50$ a month for $12$ months. Just sign here." Linda signs the paperwork and pays $\$ 50$. The washing machine is delivered to Linda's house the next day.

What might happen if Linda misses a payment to The Washer Mart?

Linda bought a washer and dryer from Millpage Laundry Supplies for y dollars. She signed an installment agreement requiring a 15% down payment and monthly payments of x dollars for one year. How many monthly payments must Linda make?

Mr. and Mrs. Johnson were struggling to make ends meet and to feed their family of five. They decided that they needed to borrow money to pay their expenses for the month. They considered going to a bank for a loan, but they knew they each had poor credit histories, and they did not want to be paying off interest over a long period of time.

They were very interested when they read the following ad in the newspaper:

EASY MONEY: Having trouble paying bills? Need a short-term loan just to get you through a rough time? We offer quick loans to anyone regardless of credit background. No interest payments. Just a nominal processing fee. Call today!! $1-555$-EZ-MONEY.

The offer sounded too good to be true. The Johnsons were skeptical, but they called anyway. The operator said she would be happy to offer them a no-interest loan of $\$ 2,000$, repayable in six easy monthly installments. All the Johnsons had to do was pay a one-time fee of $\$ 200$ to process the paperwork.

The Johnsons did not have to meet anybody from the loan company, and nobody bothered them at their home. They scraped together the $\$ 200$ and sent Easy Money, Inc., a money order. When they had not received their money in three weeks, they began to worry. They again called the number listed in the paper, but the line had been disconnected. Finally, after two more weeks, they realized they were not going to get their loan and would never see the "processing fee" again.

Did any unfair or deceptive practices take place in the Johnsons' story? Explain.

James Kirk is a financial executive with McDowell Enterprises. Although James Kirk has not had any formal training in finance or accounting, he has a “good sense” for numbers and has helped the company grow from a very small company ($500,000 sales) to a large operation ($45 million in sales). With the business growing steadily, however, the company needs to make a number of difficult financial decisions in which James Kirk feels a little “overhis head.” He therefore has decided to hire a new employee with “numbers” expertise to help him. As a basis for determining whom to employ, he has decided to ask each prospective employee to prepare answers to questions relating to the following situations he has encountered recently. Here are the questions.

• a. In 2016, McDowell Enterprises negotiated and closed a long-term lease contract for newly constructed truck terminals and freight storage facilities. The buildings were constructed on land owned by the company. On January 1, 2017, McDowell took possession of the leased property. The 20-year lease is effective for the period January 1, 2017, through December 31, 2036. Advance rental payments of $800,000 are payable to the lessor (owner of facilities) on January 1 of each of the first 10 years of the lease term. Advance payments of$400,000 are due on January 1 for each of the last 10 years of the lease term. McDowell has an option to purchase all the leased facilities for $1 on December 31, 2036. At the time the lease was negotiated, the fair value of the truck terminals and freight storage facilities was approximately$7,200,000. If the company had borrowed the money to purchase the facilities, it would have had to pay 10% interest. Should the company have purchased rather than leased the facilities?
• b. Last year the company exchanged a piece of land for a non-interest-bearing note. The note is to be paid at the rate of $15,000 per year for 9 years, beginning one year from the date of disposal of the land. An appropriate rate of interest for the note was 11%. At the time the land was originally purchased, it cost$90,000. What is the fair value of the note?
• c. The company has always followed the policy to take any cash discounts on goods purchased. Recently, the company purchased a large amount of raw materials at a price of $800,000 with terms 1/10, n/30 on which it took the discount. McDowell has recently estimated its cost of funds at 10%. Should McDowell continue this policy of always taking the cash discount?

Having saved $\$ 1,000$ from her part-time job. Sasha responded to an ad for "Like New! OneOwner Used Cars." A salesperson for A-$1$ Used Cars watched Sasha wander around the lot until she was attracted to a bright-red compact car. Sasha told the salesperson that this car looked just right for her. He replied, "You've made a good choice. This is an excellent car. It will give you many years of good service."

Although the sticker price was $\$ 6,550$, the salesperson thought that he might be able to get Sasha a $\$ 50$ discount because she was "a nice young kid getting her first car." After conferring with the sales manager, he explained to Sasha that she could have the car for $\$ 6,500$ and that the dealer could arrange to finance the car and sell her all the necessary auto insurance.

Sasha knew that she would need a loan and that auto insurance was required by law. Her excitement increased as it appeared that all her needs could be met in one stop. Sasha saw a sticker on the car's window indicating that this car came with a warranty. The salesperson told her that A-$1$ Used Cars would make any repairs to the engine for damage not caused by her misuse for $30$ days or $10,000$ miles, whichever came first. Now she felt confident about using all of her savings as a down payment. After all, what repair bills could she have with such a nice car accompanied by a terrific warranty?

Make a list of things Sasha should have done or thought about before going to A-$1$ Used Cars.