Case study (12 marks) Company XYZ is faced by a new project of a total value...
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Case study (12 marks) Company XYZ is faced by a new project of a total value 2320. The general manager decided to finance the total amount of the project with a liability over a period of 3 years. Hence, s/he has the choice between two debt alternatives. Alternative (1) consists of a simple loan with interest rate of 10%. Alternative (2) consists of borrowing the money from the bank as a fixed-payment loan. In this case, pays an annual amount of 900. 1. Compute the amount to be paid at maturity for alternative (1). (4 marks) the company 2. Using the interest rate of the first alternative, i.e., 10%, what should be the annual payment of alternative (2)? (4 marks) 3. In your opinion, what is the best alternative for company XYZ: (1) or (2), why? (4 marks) Case study (12 marks) Company XYZ is faced by a new project of a total value 2320. The general manager decided to finance the total amount of the project with a liability over a period of 3 years. Hence, s/he has the choice between two debt alternatives. Alternative (1) consists of a simple loan with interest rate of 10%. Alternative (2) consists of borrowing the money from the bank as a fixed-payment loan. In this case, pays an annual amount of 900. 1. Compute the amount to be paid at maturity for alternative (1). (4 marks) the company 2. Using the interest rate of the first alternative, i.e., 10%, what should be the annual payment of alternative (2)? (4 marks) 3. In your opinion, what is the best alternative for company XYZ: (1) or (2), why? (4 marks)
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