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Imagine you are the financial manager for a corporation purchasing a farm equipment worth $400,000. The following questions pertain to this financial decision. 1. (20pts)
Imagine you are the financial manager for a corporation purchasing a farm equipment worth $400,000. The following questions pertain to this financial decision. 1. (20pts) You approach two different banks for a loan of $200,000 to finance the purchase of this equipment. Farm Credit charges 12% APR compounded monthly. CoBank charges 12.4% APR compounded semiannually. Which bank should you use for the loan? With CoBank, how much would it cost to pay off the loan with one payment in 2 years? If inflation is 4% annually, what is the real return CoBank is earning on this loan? Explain the relationship between inflation, rates of return, and purchasing power
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