Question
17-Present Value of Multiple Annuities A small business owner visits his bank to ask for a loan. The owner states that he can repay a
17-Present Value of Multiple Annuities A small business owner visits his bank to ask for a loan. The owner states that he can repay a loan at $2,600 per month for the next three years and then $3,600 per month for the two years after that. If the bank is charging customers 6.75 percent APR, how much would it be willing to lend the business owner?
$98,377.34
$47,573.26
$12,960
$182,894.67
10-Calculating Fees on a Loan Commitment You have approached your local bank for a start-up loan commitment for $1,140,000 needed to open a car repair store. You have requested that the term of the loan be one-year. Your bank has offered you the following terms: size of loan commitment = $1,140,000, term = 1 year, up-front fee = 30 basis points, back-end fee = 30 basis points, and rate on the loan = 12%. If you immediately take down $890,000 and no more during the year, what is the total interest and fees you have paid on this loan commitment?
$110,220
$113,640
$110,970
$140,970
4-Suppose your firm is considering two mutually exclusive, required projects with the cash flows shown below. The required rate of return on projects of both of their risk class is 11 percent, and that the maximum allowable payback and discounted payback statistic for the projects are 2 and 3 years, respectively.
Time: | 0 | 1 | 2 | 3 |
Project A Cash Flow | -23,000 | 13,000 | 33,000 | 4,000 |
Project B Cash Flow | -33,000 | 13,000 | 17,000 | 53,000 |
Use the payback decision rule to evaluate these projects; which one(s) should it be accepted or rejected?
accept A, reject B
reject A, accept B
accept neither A nor B
accept both A and B
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