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Msg  39524 of 147586  at  2/13/2007 7:02:38 PM  by

MarionPolk2000


Strong Buy

Credit card financing explained

The "best" offer your credit card company will typically offer you is money at 5.9% fixed for as long as you owe the money. Typically the minimum monthly payment is 2% of the card balance.

If you obtain $16,500, and buy 1,000 shares of NFI, then you incur an initial monthly payment of $330, or $3,960 per year, ignoring the fact that the payment gradually declines.

NFI pays you $5,600 per year, so your initial net cash is $1,640 per year (pre-tax). Eventually the credit card debt amortizes to zero, and NFI pays an income stream forever. No margin calls, no worry about stock prices, but bad news if NFI cuts the dividend below $3.96 per share in 2007.

In the second year, the credit card payment is roughly $3,000 per year, so you are not cash flow negative unless NFI cuts the dividend below $3.00 per share in 2008.

Meanwhile, If the NFI stock price hits $40, there is a "paper" profit of $23,500 on a capital investment of zero.


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Recs: 32     Views: 2558
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Replies
Msg # Subject Author Recs Date Posted
39533 Re: Credit card financing explained thejuice212 6 2/13/2007 7:24:03 PM
39539 Re: Credit card financing explained -- marion guusz 4 2/13/2007 7:32:26 PM
41945 Re: Credit card financing explained W 4 2/20/2007 5:35:07 PM
44231 Re: Credit card financing explained EdEddEddie 1 2/23/2007 8:14:28 AM
93080 Re: Credit card financing explained DarlJDumont 4 1/13/2008 8:55:41 PM
102085 Re: Credit card financing explained DarlJDumont 1 6/22/2008 1:16:48 PM


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