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6.16 Effective annual rate: Raj Krishnan bought a Honda Civic for $17,345. He put down $6,000 and financed the rest through the dealer at an
6.16 Effective annual rate: Raj Krishnan bought a Honda Civic for $17,345. He put down $6,000 and financed the rest through the dealer at an APR of 4.9 percent for four years. What is the effective annual rate (EAR) if the loan payments are made monthly? 6.23. Growing annuity: Modern Energy Company owns several gas stations. Management is looking to open a new station in the western suburbs of Baltimore. One possibility that managers at the company are evaluating is to take over a station located at a site that has been leased from the county. The lease, originally for 99 years, currently has 73 years before expiration. The gas station generated a net cash flow of $92,500 last year, and the current owners expect an annual growth rate of 6.3 percent. If Modern Energy uses a discount rate of 14.5 percent to evaluate such businesses, what is the present value of this growing annuity
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