17A)

Jon is considering the purchase of 340 acres of land for $1527.18 per acre. A bank will loan him $1,290 per acre of land and the loan will be fully amortized over 20 years at 18%. The outstanding balance of the loan will be paid at the end of the third year. Assume that the marginal tax rate is 20%. Suppose that the following information is given:

Net Cash Flow before debt in Year 1= $162.00

Net Cash Flow before debt in Year 2= $177.00

Net Cash Flow before debt in Year 3= $1,522.00

How much down payment is needed?

a. $92,898 b. $64,512

c. $80,641 d. $76,125

e. None of the answers are correct

Calculate the amount of loan payment per acre per period.

a. $293 b. $241

c. $192 d. $197

e. None of the answers are correct

Calculate the per acre tax savings from paying interest in year 2.

a. $18 b. $21

c. $46 d. $20

e. None of the answers are correct

How much money needs to be generated from other parts of the business to cover the cash deficit in the 1^st year, so that the investment is financially feasible?

a. $15,829 b. $19,787

c. $11,070 d. $23,744

e. None of the answers are correct

How much money needs to be generated from other parts of the business to cover the cash deficit in the 2^nd year, so that the investment is financially feasible?

a. $12,457 b. $6,079

c. $15,571 d. $8,374

e. None of the answers are correct