prepare an amortization table for the loan at 16% and at 9% and calculate the difference in after-tax interest payments. The NPV of the difference in the after-tax interest payments is the NPV of the loan.

10. In late 1984, Sonat, the Birmingham, Alabama-based, energy and energy services company, ordered six drilling rigs that can be partly submerged from Daewoo Shipbuilding, a South Korean shipyard. Daewoo agreed to finance the $425 million purchase price with an 8.5 year loan, at an annual interest rate of 9% paid semiannually. The loan principal is repayable in 17 equal semiannual installments ( $25 million every six months). At the time the loan was arranged, the market interest rate on such a loan would have been about 16%. If Sonat's marginal tax rate (federal plus state corporate taxes) was 50% at the time, how much would this loan be worth to Sonat