Question: Nick has a project in mind that will require $100 of money to run the business. The project will last for only one year and

Nick has a project in mind that will require $100 of money to run the business. The project will last for only one year and cease existence after that. Nick has only $50 of his own money and he needs to attract the remaining $50 by borrowing it from his buddy Sam. The loan has an 8% annual interest rate. If the end-of-year cash generated by the business activities is $40, what is Sams rate of return? Nick has a project in mind that will require $100 of money to run the business. The project will last for only one year and cease existence after that. Nick has only $50 of his own money and he needs to attract the remaining $50 by borrowing it from his buddy Sam. The loan has an 8% annual interest rate. If the end-of-year cash generated by the business activities is $40, what is Sams rate of return?

20% 40% 100% 8% 8%

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