Financial Reporting and Money Market

You are the financial analyst of your company. Your company wants to

acquire a property to expand its operations. Assume, you advise your

company to borrow from any financial institution (particularly, a bank) to be

able to acquire the property. What will be the average borrowing rate the

bank will charge your company for borrowing from them?

Required:

Given the scenario above, download/obtain a recent financial statement (within

the past 5 years) of any bank (in Ghana) of your choice. With your knowledge in

strategic finance issues and the principle of financial statement analysis, provide

a brief (general) report on the financial statement and use the information from

the financial statement to estimate the base rate.

Additional Information

Suppose that the bank receives a required rate of return of 18% and the beta in

the market is 0.75.

Use the 2021 (3rd Quarter) values for all macro-level indicators needed to compute

the base rate.

Using the past year and the current year in your computation is an added

advantage.

PART II [50 Marks]

Assume the cost of the property, in Part I above, is US$7,900,000. Your

company instructs the selected bank to put 20% down and obtained a simple

interest amortized loan for the balance at the annually interest (i.e.,

borrowing rate of the selected bank) for 30 years.

i. Find the amount of your companys monthly payment.

ii. Find the total interest paid by your company.

iii. Most lenders will approve a property only if the total of all the

borrowers monthly payments, including the property loan payment, is

no more than 38% of the borrowers monthly income. How much

must your company make in order to qualify for the loan?

iv. Complete an amortization table for the first 2 months of the loan, the

180th through 181th months (only find the balance due for the 180th

month) of the loan, and the final 2 months (only find the balance due

for the 359th month) of the loan.1