Question
Carhart Industries Inc. has a large amount of bank loans coming due in 5 years. The firm's CFO wishes to ensure that there is sufficient
Carhart Industries Inc. has a large amount of bank loans coming due in 5 years. The firm's CFO wishes to ensure that there is sufficient liquidity to make payments. The firm uses Discounted Payback to assess projects and the firm requires all projects to have a Discounted Payback of 5 years or less.
You are a manager at Carhart Industries. A new project promises a constant annual payment forever and costs $192,325. The project is of average risk to the firm and the cost of capital is 9.3%.
What is the minimum amount for the annual payment that will satisfy the CFO's liquidity concerns? (Round your answer to nearest whole number)
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