Your boss has asked you to evaluate the economic viability of refinancing a loan on your plant's
Question:
Your boss has asked you to evaluate the economic viability of refinancing a loan on your plant's process equipment. The original loan of $700,000 was for 7 years. The payments are monthly and the nominal interest rate on the current loan is 9?%per year. As of the present time, your company has had the loan for 36 months. The new loan would be for the current balance? (i.e. the balance at the end of the 36th month on the old loan) with monthly payments at a nominal interest rate of 3?%per year for 4 years. A one-time financing fee for the new loan is? $20,000.Your company's MARR is 12?% per year on a nominal basis. Determine if the new loan is economically advantageous.
What is the present worth of the difference between the original financing plan and the new (proposed) financing plan?
Engineering Economy
ISBN: 978-0132554909
15th edition
Authors: William G. Sullivan, Elin M. Wicks, C. Patrick Koelling