Question
Eighteen years ago, the Archer Corporation borrowed $6,600,000. Since then, cumulative inflation has been 70 percent (a compound rate of approximately 3 percent per year).
Eighteen years ago, the Archer Corporation borrowed $6,600,000. Since then, cumulative inflation has been 70 percent (a compound rate of approximately 3 percent per year). |
a. | When the firm repays the original $6,600,000 loan this year, what will be the effective purchasing power of the $6,600,000? (Hint: Divide the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.) |
Effective purchasing power | $ |
b. | To maintain the original $6,600,000 purchasing power, how much should the lender be repaid? (Hint: Multiply the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.) |
Loan repayment | $ |
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