$7.$ Suppose that you have generated the estimates listed below from a pro forma analysis for a

company that had requested a three year loan. The loan is a $$1\mathrm{.}5$ million term loan with the equal

annual payments of principals. The P&I payments are due at the end of each year with the annual

interest rate $=$ Prime rate $+1\mathrm{.}5\%.$

Yr$\mathrm{.}1$ Yr$.2$ Yr$.3$

Capital expenditure $250,000125,00075,000$

Cash dividends $140,000140,000140,000$

Cash flow from operations before interest expense $750,000780,000800,000$

Assuming the Prime rate $=7\mathrm{.}5\%$ each year. What will be the interest payment at year $2?$

a$).25,000$

b$).50,000$

c$).75,000$

d$).53,000$

e$).10,000$