Subject: Financial Management

Q1 BioTech has decided to finance the project with initial investment of $50,000 through debt financing. The bank has offered loan at 9% interest for a period of 5 years based on 3 different repayment methods. Recommend which method of debt financing is most cost effective and explain why. Support your recommendation with relevant workings. (a) All principal and compound interest are paid back on the 5th year. Show the loan amortization table. (8 marks) (b) Interest are paid yearly with principal paid at end of the 5th year. Show the loan amortization table. (8 marks) (c) Pay 5 equal payments at each year inclusive of interest and principal. Show the loan amortization table. (8 marks) (d) Recommend which method of debt financing is most cost effective and explain why