You are trying to determine how to finance an upcoming piece of equipment in question Please analyze
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You are trying to determine how to finance an upcoming piece of equipment in question Please analyze the financing proposals below and document any qualitative factors you should consider before making a determination. | ||||||
Financing proposals 1. Line of credit You can acquire a line of credit from the bank. The loan bears interest at prime plus 2.8%. The prime lending rate is currently 3.5%, and You would pay interest only on the amount actually borrowed. The total maximum amount available on this line of credit is $200,000. The line of credit is callable on demand at the bank's option. The line of credit would be secured by the company's property, plant, and equipment. 2. Five-year term loan The bank is also prepared to offer a $150,000 long-term loan secured by the company's new equipment purchase. The term loan would be for five years and bear interest at 5.3%. Interest only is payable monthly, with the principal due at maturity in March 2028. 3. Loan from friend Your friend is willing to lend the you $100,000 interest-free in exchange for 0.5% of your sales for five years. The principal is due at the end of five years. Your annual sales is expected to be $2.5M. |
Related Book For
Managerial accounting
ISBN: 978-0471467854
1st edition
Authors: ramji balakrishnan, k. s i varamakrishnan, Geoffrey b. sprin
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