# Question

Suppose you are a loan officer for a bank. A start-up company has qualified for a loan. You are pondering various proposals for repayment:

1. Lump sum of $250,000 five years hence. How much will you lend if your required rate of return is (a) 8%, compounded annually, and (b) 12%, compounded annually?

2. Repeat number 1, but assume that the interest rates are compounded semiannually.

3. Suppose the loan is to be paid in full by equal payments of $50,000 at the end of each of the next 5 years. How much will you lend if your required rate of return is (a) 8%, compounded annually, and (b) 12%, compounded annually?

1. Lump sum of $250,000 five years hence. How much will you lend if your required rate of return is (a) 8%, compounded annually, and (b) 12%, compounded annually?

2. Repeat number 1, but assume that the interest rates are compounded semiannually.

3. Suppose the loan is to be paid in full by equal payments of $50,000 at the end of each of the next 5 years. How much will you lend if your required rate of return is (a) 8%, compounded annually, and (b) 12%, compounded annually?

## Answer to relevant Questions

Because of a salary cap, NBA teams are not allowed to exceed a certain annual limit in total player salaries. Suppose the Minnesota Timberwolves had scheduled salaries exactly equal to their cap of $90 million for 2012. Kim ...Czick Company is considering an investment in a machine that costs $36,048 and would result in cash savings of $10,000 per year for 5 years. The company’s cost of capital is 10%.1. Compute the project’s NPV at 10%, 12%, ...Snuffy’s Drive-In is considering a proposal to invest in a speaker system that would allow its employees to service drive-through customers. The cost of the system (including installation of special windows and driveway ...Green Lighting Company produces industrial and residential lighting fixtures at its manufacturing facility located in Scottsdale, Arizona. The company currently ships products to an eastern warehouse via common carriers at a ...Berradi Corp. is considering the purchase of a new stamping machine to manufacture its product. The following information is available:New MachinePurchase cost new ........... $85,000Annual increase in cash revenues ...... ...Post your question

0