To expand its operation, the International Tools Inc (ITI) has applied for a $3,500,000 loan from the International Bank. According to ITI's financial manager, the company can only afford a maximum yearly loan payment of $1,000,000
The bank has offered ITI, (1 ) a 3-year loan with a 10 percent interest rate, (2 ) a 4-year loan with a 11 percent interest rate, or (3 ) a 5-year loan with a 12 percent interest rate.
(a) Compute the loan payment under each option.
(b) Which option should the company choose?
(a)
(1 ) Using financial calculator: PV=3500000, N=3, FV=0, I = 10, CPT PMT = 1,407,402
(2 ) Using financial calculator: PV=3500000, N=4, FV=0, I = 11, CPT PMT = $1,128,304.32
(3 ) Using financial calculator: PV=3500000, N=5, FV=0, I = 12, CPT PMT = $ 970,873.79
(b) The company should choose option #3.
You might also like to view...
The cash account in the company's ledger is a(n)
A) asset with a debit balance B) asset with a credit balance C) liability with a debit balance D) liability with a credit balance
A typical stereotype of U.S. people is that they place great importance on the family
Indicate whether the statement is true or false.
Which stage of the organizational design process includes focusing on employees’ roles and performance, the way they communicate with each other, and their willingness to adjust to change?
a. Gathering data b. Renew the design c. Setting the scene d. Implementing the design
Ryan, the owner of SuperMart Stores, Inc., adheres to the "principle of rights" theory. Under this theory, a key factor in determining whether a business decision is ethical is how that decision affects
A. the right determination under a cost-benefit analysis. B. the rights of others. C. the "right" thing to do. D. the right to make a profit.