Question
Mr. Jack, a valued client of MTB Ltd. applied for a Term Loan of CAD 40,000/- to purchase machineries for his new plastic manufacturing project.
Mr. Jack, a valued client of MTB Ltd. applied for a Term Loan of CAD 40,000/- to purchase machineries for his new plastic manufacturing project. The manager of the branch advised Mr. A. Ray, Credit Officer of the branch to make an appraisal report of aforesaid Term Loan. After long discussion with the client, Mr. Ray determined that the after-tax cash flows for the project will be CAD10,000, CAD12,000, CAD15,000, CAD10,000, and CAD7,000 respectively for each of the Years 1 through 5 of project life. The bank usually provide term loan @8% per annum. Now, what would be the suggestion of Mr. Ray to the Manager of the branch based on IRR method of Term Loan Appraisal?
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