Question: 7. [Loan Present Values] Jerrys Tree Services is trying to raise debt funds from a prospective venture investors, SureWay LLC. SureWay indicated to Jerry Lau

7. [Loan Present Values] Jerrys Tree Services is trying to raise debt funds from a prospective venture investors, SureWay LLC. SureWay indicated to Jerry Lau that the annual interest rate on risky venture loans is currently 15 percent. Jerry is seeking a 3-year loan with annual payments. He is willing to pay back $100,000 at the end of 3 years. However, due to cash flow problems, he can afford to pay interest at a 12 percent annual rate.

A. Calculate the dollar amount that SureWay venture investors would lend to Jerrys Tree Services.

B. What would be the dollar amount of the loan if the loan was made for only two years?

8. [Loan Present Values] Refer to Problem 7. Show how your answer to Part A of Problem 7 would change if Jerry were willing to pay 16 percent annual interest and a principal payment of $100,000 at the end of three years.

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