It was established, in a company, the need to acquire a new building to expand the operation of a milk production plant. It was determined that it requires a source of financing in a bank in the country. To do so, it determined that it requires US$1,200,000, which could be lent by the following financial entities.

1. a) Bank A: a 10-year loan, with a rate of 12%, with a two-year grace period.

2. b) Bank B: a loan for 8 years at a rate of 11%, and the first year does not pay interests.

3. c) Bank C: a 12-year loan, at a rate of 7.5%. In all cases, the installment payment is monthly and the interest is annual.

It is requested:

Determine which is the best financing option, knowing that the building has a utility of 11 years, for this you must determine and give a utility of $420,000 and each year increases 6% from the previous year, until year 7 and then decreases 9% from year 8 to year 11, equally decreasing per year.

a) The quota of the different financings.

b) Amortization tables that reflect the payment of principal and interest on the financing.

c) If the return is 5% per year, determine the Net Present Value throughout the useful life.

Answer rating: 100% (QA)

To determine the best financing option for the milk production plant we need to calculate the total ... View the full answer