Please help with question #5

N 2 3 4 5 A B C D E F G H J K L M McCormick & Company is considering building a new factory in Largo, Maryland. James Francis, a landowner, is selling a 4.35-acre parcel of industrial zoned land with a listed sale price of $3,000,000.00 for the land. McCormick & Company is interested in the land and so is another manufacturing company. The competing manufacturing company has made a full offer of $3,000,000.00 for the land. McCormick & Company knows it can make an offer to outbid the competitor to obtain the land. So, McCormick & Company decided to offer $4,424,000.00 CON Now, the landowner must make a decision between the two competing offers. To make this decision, James should first identify the Future Value (FV) of each offer. James's bank is offering a 12 percent interest rate when invested through the bank-managed growth stock portfolios. Let's help James make his decision by answering the following questions using the template to the right. O 1. What is the Future Value (FV) of each offer? FV=13,740,272 What is the two competing offers? Unknown manufacturing company makes an for $3,000,000.00 and McCormick & Company makes an offer $4,424,000.00. 14 15 2. Based on your Future Value calculations, which offer should James accept? James should accept the offer from McCormick and Company. 17. McCormick & Company has decided in order for the company to have a minimal impact on current cash flows, the company will need to borrow 70 percent Loan to Value (LTV) of the $4,424,000.00 offer in the form of a commercial acquisition and development loan to purchase the land. This means McCormick & Company will need to make a 30 percent down payment to secure the commercial acquisition and development loan. McCormick & Company is considering three different loan options: Loa Loa Loa 22 23 Loan A: 20 year loan with a fixed annual interest rate of 6 percent Loan B: 10-year loan with a fixed annual interest rate of 4.5 percent Loan C: 15-year loan with a fixed annual interest rate of 5 percent Ioa 25 3. How much of the total $4,424,000.00 offer will be financed? 3,096,800 Loa Loa 26 5. Which loan will have the lowest total payback amount? 6. Would you recommend McCormick & Company select the loan with lowest monthly payment or Trecommend McCormick select the loan with the lowest overall total payment of $269,993.14 as th the total cost of the loan is less. Loan A would be my recommendation. 3 36 37 38 39 40 47 42 43 Instructions Financing and Investing Corporate Valuation Annuities Loan C 5% $ 3,096,800.00 ($298,352.80) PMT Total Paid Loan Loan A Loan B Loan C aluation Annuities 4:46 PM e @ L ES o w 92% ^6 (ca. 1) 11/25/2018