Question
Kendrick Enterprises is evaluating a 10-year, 7.5 percent loan with gross proceeds of $4,450,000. The interest payments on the loan will be made annually. All
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Kendrick Enterprises is evaluating a 10-year, 7.5 percent loan with gross proceeds of $4,450,000. The interest payments on the loan will be made annually. All principal will be repaid in one balloon payment at the end of the tenth year. Flotation costs are estimated to be 2.5 percent of gross proceeds and will be amortized using a straight-line schedule over the 10-year life of the loan. The company has a tax rate of 40 percent, and the loan will not increase the risk of financial distress for the company. What is the net present value of the loan including flotation costs?
$835,650
$946,900
$927,500
$630,327
Kendrick Enterprises is evaluating a 10-year, 7.5 percent loan with gross proceeds of $4,450,000. The interest payments on the loan will be made annually. All principal will be repaid in one balloon payment at the end of the tenth year. Flotation costs are estimated to be 2.5 percent of gross proceeds and will be amortized using a straight-line schedule over the 10-year life of the loan. The company has a tax rate of 40 percent, and the loan will not increase the risk of financial distress for the company. What is the net present value of the loan including flotation costs?
| $835,650 | ||
| $946,900 | ||
| $927,500 | ||
| $630,327 |
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Energy And Finance Sustainability In The Energy Industry
Authors: André Dorsman, Özgür Arslan-Ayaydin, Mehmet Baha Karan
1st Edition
3319322664, 978-3319322667
