Question
You plan to start a 3-month project which requires an initial investment of $100,000. The project is expected to yield net monthly profit of $35,000.
You plan to start a 3-month project which requires an initial investment of $100,000. The project is expected to yield net monthly profit of $35,000. You currently have only $40,000 in your account, so to initiate this project, you need to borrow a 3-month loan of $60,000 which requires monthly payments with an annual interest rate of 10% compounded continuously. You have two options for the loan payment scheme: CPM and CAM. a) (10pt) Find all net cash flows during the whole period when you choose CPM. b) (10pt) Find all net cash flows during the whole period when you choose CAM. c) (10pt) Use the IRR incremental analysis to determine which loan payment scheme should be selected when the monthly MARR is 1%. (Do not use linear interpolation.)
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