A large firm received a loan guarantee from the government. Due to the guarantee, the firm can borrow $77 million for 8 years at 4.5% interest rate per year instead of 8.0% per year. Interest payments are made at the end of each year, and principal is repaid at the maturity of the loan. Calculate the value of the guarantee to the firm. (Ignore taxes.)

 

Enter your answer in millions of dollars rounded to the second decimal place. For example, enter $12,345,000 as 12.35.

Answer rating: 100% (QA)

To calculate the value of the guarantee to the firm we need to compare the total interest payments u... View the full answer