Question
1. The owners of a successful restaurant want a loan for $50,000 to renovate the kitchen and expand the dining room. They expect that the
1.The owners of a successful restaurant want a loan for $50,000 to renovate the kitchen and expand the dining room. They expect that the extra tables will add between $2,000 and $5,000 to the restaurant's monthly revenue. The bank is willing to let the business have an intermediate-term loan of $50,000 for five years, at an interest rate of 6.5 percent. Calculate the monthly payment, and explain whether taking this loan is a smart business decision.
2.An online store that has been successfully growing on its initial angel investment and revenues wants to invest $5 million to expand the business. The bank is willing to lend the business this money at a 10 percent interest rate over an eight-year term. Calculate the monthly payment, and explain what the business must be able to do with this money in order for this to be a smart business decision.
3.A landlord wants to acquire an additional apartment building for $250,000. The new building contains eight apartment units, which will each rent for $500 per month. The bank is willing to loan the landlord the money for a long-term, 30-year loan at a 5.5 percent interest rate. Calculate the monthly payment, and explain whether taking this loan for the new building is a smart business decision.
4.The owner of a flower shop needs a short-term loan to tide her business over until she completes the sale of some unused property. She asks the bank for a $25,000 six-month loan. The bank agrees to give her the loan, but it attaches a hefty interest rate of 18 percent. Calculate the monthly payment, and explain how the florist can handle taking this loan.
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