Question
Suppose you are offered a $2,600,000 investment in a facility that performs PET scans. The investment will pay you $90,000 at the end of each
Suppose you are offered a $2,600,000 investment in a facility that performs PET scans. The investment will pay you $90,000 at the end of each month for the next 6 years and nothing after that. To make this investment, you pay no money now, but you must borrow the entire principal amount of $2,600,000 from LoRate Bank at 2% per month. The loan must be repaid in one lump sum at the end of the 6 years. Absolutely no prepayment of principal or interest is allowed. Total payment at the end of the 6 years, of both principal and interest for the loan will be $10,818,965. This package of borrowing the money and investing in the facility is absolutely riskless, and you will for sure get the money as promised. Explain why making this investment would be either a BAD or GOOD deal for you AND provide supporting calculations.
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