1. A promise to repay $93,000 eight years from now at an interest rate of 9%. 2. An agreement to make three separate annual payments of $17,000, with the first payment occurring 1 year from now. The annual interest rate is 4%.

1. A promise to repay $93,000 eight years from now at an interest rate of 9%. 2. An agreement to make three separate annual payments of $17,000, with the first payment occurring 1 year from now. The annual interest rate is 4%.

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter4: Time Value Of Money

Section4.17: Amortized Loans

Problem 1ST

See similar textbooks

Related questions

Q: On January 31, 2022 you purchased a newly issued 5.6% coupon bond issued by the Dana Corporation for…

A: Price of a bond is the present value of coupon payments plus the present value of the par value of…

Q: BN Enterprises currently has no debt and a 15.9% cost of equity. The tax rate is 30%. BN plans to…

A: The weighted average cost of capital (WACC) is a financial metric used to determine the average rate…

Q: Judson Industries is considering a new project. The project will initially require $749,000 for new…

A: The capital cost allowance (CCA) is a tax deduction that allows eligible taxpayers to deduct the…

Q: The Monster Truck operates several specialty vehicles that provide hot food and beverages for firms…

A: Annual sales: $626,300Accounts receivable: $35,000Number of days in a year: 365

Q: Assets Cash Investments ( 1 year) Total the bank's one-year repricing gap is (million) Return 0.00%…

A: 1 year repricing gap= rate sensitive assets - rate sensitive liabilities

Q: You are considering a project which requires $250,000 in external financing. The flotation cost of…

A: Initial Cost of Project:The initial cost of a project refers to the total expenses incurred at the…

Q: eBook Problem Walk-Through Project L requires an initial outlay at t= 0 of $62,699, its expected…

A: Initial Outlay = i = $62,699Cash Flow = cf = $12,000Time = t = 9 YearsWeighted Average Cost of…

Q: Suppose Alcatel-Lucent has an equity cost of capital of 9.5%, market capitalization of $11.84…

A: Free cash flow of equity:“Free cash flow of equity” refers to the cash that a company generates…

Q: HT Bowling, Inc is considering the purchase of VOIP phone system. It will require an initial…

A: Equivalent annual cost is the cost of operating and maintaining an asset annually. It is also called…

Q: when you initially purchased it? assuming the bond earned 3.97 percent annually, approximately how…

A: EEBonds are issued by government and these bonds are issued at half cost and will double in prices…

Q: When the bond’s coupon rate is less than the bondholder’s required return, the bond’s intrinsic…

A: Price of bond is the present value of the coupon payments plus present value of the face value of…

Q: An all-equity firm is considering the following projects: Project W X Y Z Beta IRR .54 .91 1.09 1.83…

A: Expected return on investment is the probability of returns that is available to the investors. The…

Q: Bill Padley expects to invest $24,000 for 9 years, after which he wants to receive $28,682.40. What…

A: Present Value = pv = $24,000.00Time = t = 9 yearsFuture Value = fv = $28,682.40

Q: BL Plc, a manufacturing firm, is growing at a phenomenal rate of 15% due introduction of a snack for…

A: Dividend (D0) = GH¢101st stage growth rate = 15%Growth rate after 5 years = 10%Required rate = 20%

Q: Following is information on two alternative investments. Beachside Resort is considering building a…

A: Making decisions about capital budgeting entails assessing and choosing capital expenditures or…

Q: Suppose the market portfolio is equally likely to increase by 40% or decrease by 2%. Also suppose…

A: PORTFOLIO OF INVESTMENTA portfolio of investment refers to a collection of assets such as stocks,…

Q: Beacon Company is considering automating its production facility. The initial investment in…

A: The payback period is a financial metric used to assess the time required to recoup an initial…

Q: Calico Restaurants is planning to create a new online meals-to-order service and has estimat vill…

A: NPV is the most used method of capital budgeting based on time value of money and should be positive…

Q: Required: a. Construct a set of yearly cash flows to WeGrow II and to the endowment b. What is the…

A: IRR is the discount rate at which the net present value (NPV) of cash flows from an investment…

Q: You observe a portfolio for five years and determine that its average return is 11.87% and the…

A: Range=Average return ±2 x Standard deviation.

Q: Homesaver Ltd believes it can sell 10,000 home smoke detectors per year at $40 each. Variable cost…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: A market-neutral fund ($154,000,000) strives for very low market risk (β = 0.12). It believes it can…

A: An investor's expected return is the total amount of money they expect to gain or lose on a…

Q: Kim Hotels is interested in developing a new hotel in Seoul. The company estimates that the hotel…

A: NET PRESENT VALUE:NPV analysis involves forecasting future cash flows, determining an appropriate…

Q: The managers of Classic Autos Incorporated plan to manufacture classic Thunderbirds (1957 replicas…

A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…

Q: 15. A company purchases a piece of equipment for $15,000. After nine years, the salvage value is…

A: Present worth or the current worth of the investment can be find by using PVIFA and PVIF factor…

Q: merchant receives an invoice for $8000 with terms 2/10, n/50. a) What is the maximum interest rate…

A: Discount is the amount to be paid less than actual prices and that is done for the early payment of…

Q: A cost-cutting project will decrease costs by $67,300 a year. The annual depreciation will be $16,…

A: In this question, we are required to determine the operating cash flow.

Q: Suppose Johnson & Johnson and Walgreen Boots Alliance have expected returns and volatilities shown…

A: Expected returnStandard deviationsInvestment amountJohnson & Johnson7.2%14.8%$10,000.00Walgreens…

Q: one way to improve a companys cash conversion cycle is to increase its days sales outstanding true…

A: In this question, we are required to determine whether the statement given in the question is true…

Q: 5 b. A project has the following costs and benefits. What is the payback period (Be exact to 1…

A: Payback period (PBP) refers to the period or duration within which the company is able to recover…

Q: Wildhorse Inc. wants to purchase a new machine for $38,790, excluding $1,500 of installation costs.…

A: Capital budgeting refers to the measure to evaluate various projects before investment. For this…

Q: MCQ: Legacy Inc. recently issued bonds that mature in 10 years. They have a par value of $1,000 and…

A: Price of the bond can be determined by calculating the present value of the cash flows and the…

Q: Given the current exchange rate of TT$6.7993 / US$, what will be the expected exchange rate one year…

A: According to purchase power parity the exchange rate between the currencies must in line with…

Q: Pretend that the country is in a normal economic climate. Suppose that the Federal Reserve,…

A: The objective of the question is to understand the impact of the Federal Reserve's decision to…

Q: Cost of equity) The common stock for the Bestsold Corporation sells for $58. If a new issue is sold,…

A: Cost of common equity refers to the cost associated with the investment made for the equity shares…

Q: Suppose your firm is seeking a seven - year, amortizing $770,000 loan with annual payments, and your…

A: Interest rate refers to the charge that is being charged by the lender from the borrower on the loan…

Q: You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and…

A: Bonds are financial instruments that represent a loan made by an investor to a borrower, typically a…

Q: A _______________ is a private investment pool open only to wealthy or institutional…

A: In this question, we are required to determine the investment option which is exempt from SEC…

Q: Ivanhoe Company is considering these two alternatives for financing the purchase of a fleet of…

A: Earnings Per Share:Earnings per share is a fundamental measure of a company’s profitability and an…

Q: IDX Tech is looking to expand its investment in advanced security systems. The project will be…

A: Information Provided:Oustanding debt = $344 millionNumber of shares of common stock = 89…

Q: Suppose that the average stock has a volatility of 57%, and that the correlation between pairs of…

A: Portfolio volatility is a measure of portfolio risk, meaning a portfolio's tendency to deviate from…

Q: Project L requires an initial outlay at t= 0 of $59,000, its expected cash inflows are $12,000 per…

A: Initial outlay = $59,000Expected cash Inflows =$12,000

Q: A proposed cost-saving device has an installed cost of $765,000. The device will be used in a…

A: Working capital, a vital metric in financial management, is the difference between a company's…

Q: a. Calculate earnings per share, EPS, under each of the three economic scenarios before any debt is…

A: Earnings per share (EPS) shows how much of a company's profits are distributed to each outstanding…

Q: Your portfolio is 210 shares of Sabrina, Incorporated. The stock currently sells for $91 per share.…

A: Price per share at present: $91Dividend per share: $2.20Number of shares in portfolio: 210

Q: You are an angel investor, and 4 entrepreneurs have approached you to build some innovative folding…

A: Net present value is a capital budgeting metric that helps analyze the project's profitability by…

Q: document for 6,000 pesos for 365 days with interest at 19.5% simple interest, dated August 10, 2023,…

A: Simple interest is the very simple interest and there is interest on the principal amount only and…

Q: Lou Barlow, a divisional manager for Sage Company, has an opportunity to manufacture and sell one of…

A: “Since you have posted a question with multiple sub parts, we will provide the solution only to the…

Q: Although we can determine the optimal bid and the expected profit from that bid in a bidding…

A: To determine the probability of winning in a bidding simulation, one must examine several factors…

Q: Suppose you observe the following situation: Security Beta Expected Return Pete Corp. 1.70 0.180…

A: As per CAPMExpected return=Risk free rate+Beta*(Market rate-Risk free rate)

Concept explainers

Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.

Question

Compute the amount that can be borrowed under each of the following circumstances: (PV of $1. FV of $1. PVA of $1, and FVA of $1)
(Use appropriate factor(s) from the tables provided. Round your "Table value" to 4 decimal places.)
1. A promise to repay $93,000 eight years from now at an interest rate of 9%.
2. An agreement to make three separate annual payments of $17,000, with the first payment occurring 1 year from now. The annual
interest rate is 4%.
Option 1
Loan amount
Option 2
Annual payments
Table Value
Table Value
Amount
Amount
Present Value
Present Value

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction:

VIEW

Step 2: Computation of the present value:

VIEW

Step 3: Computation of the present value:

VIEW

Solution

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 4 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

Compute the amount that can be borrowed under each of the following circumstances: (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "Table value" to 4 decimal places.) 1. A promise to repay $92,000 nine years from now at an interest rate of 8%. 2. An agreement to make three separate annual payments of $29,000, with the first payment occurring 1 year from now. The annual Interest rate is 7%. Option 1 Loan amount Option 2 Annual payments Table Value Table Value Amount Amount Present Value Present Value
Compute the amount that can be borrowed under each of the following circumstances: (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "Table value" to 4 decimal places.) 1. A promise to repay $97,000 four years from now at an interest rate of 10%. 2. An agreement to make three separate annual payments of $10,000, with the first payment occurring 1 year from now. The annual interest rate is 8%. Option 1 Loan amount Option 2 Annual payments Table Value Table Value Amount Amount Present Value Present Value
Compute the amount that can be borrowed under each of the following circumstances: (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your "Table value" to 4 decimal places.) 1. A promise to repay $99,000 ten years from now at an interest rate of 7%. 2. An agreement to make three separate annual payments of $20,000, with the first payment occurring 1 year from now. The annual interest rate is 5%. Option 1 Loan amount Option 2 payments Table Value Table Value Amount Amount $ Present Value Present Value 0
4. Establish loan amortization schedules for 3-year loan of $20,000 (initial loan) with equal payments at the end of each year. The interest rate is 5 percent per year. (20p) NOTE: PLEASE SHOW HOW YOU COMPUTE EACH OF THE ITEMS.
Find the payment necessary to amortize a 5.5% loan of $7700 compounded semiannually, with 6 semiannual payments. Find (a) the payment necessary to amortize the loan and (b) the total payments and the total amount of interest paid based on the calculated semiannual payments. Then create an amortization table to find (C) the total payments and total amount of interest paid based upon the amortization table. a. The semiannual payment needed to amortize this loan is $ (Round to the nearest cent as needed.) b. The total amount of the payments is $ (Round to the nearest cent as needed.) The total amount of interest paid is $ (Round to the nearest cent as needed.) c. The total payment for this loan from the amortization table is $ %24 The total interest from the amortization table is $
Use aspreadsheet to create amortization schedules for the following five scenarios.What happens to the total interest paid under each scenario?a. Scenario 1:Loan amount: $1 millionAnnual rate: 5 percentTerm: 360 monthsPrepayment: $0b. Scenario 2: Same as 1, except annual rate is7 percentc. Scenario 3: Same as 1, except term is 180monthsd. Scenario 4: Same as 1, except prepayment is$250 per monthe. Scenario 5: Same as 1, except loan amount is$125,000
Label all final answers with the correct units, if applicable. Unless otherwise stated, use 4 decimal places for intermediate computations of interest rates (if needed) then round off final answers to two decimal places. For monetary amounts, use 2 decimal places even for intermediate computations. 5. Juan takes out a 3-year multi-purpose loan for P200,000 from a loaning institution. The annual interest rate is 12.0% compounded monthly. a. Determine the monthly amortization for this loan. b. How much does he still owe after paying 6 installments? Show the table of diminishing balances as part of your solution. c. Due to the pandemic, the loaning institution offered a loan restructuring program in which a bor- rower's current loan balance can be recomputed with a reduced annual interest rate of 9.0%, with payment terms of up to 5 years. Juan decides to avail of this program. If he will pay off the remainder of his loan within 30 months, what will be his monthly installment under this…
Prepare an amortization schedule for a three-year loan of $117,000. The interest rate is 8 percent per year, and the loan calls for equal annual payments. How much total interest is paid over the life of the loan? Note: Leave no cells blank. Enter '0' where necessary. Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16. Year 1 2 3 $ Beginning Balance 117,000.00 Total Payment Total interest Interest Payment Principal Payment Ending Balance
Determine the equal, annual, end of year payment required for each year over the life of the loan shown in the following table to repay it fully during teh stated term of the loan. Principal: $43,000 Interest Rate: 7% Term of Loan (years): 21 The amount of the equal, annual, end of year payment, CF is?
Prepare an amortization schedule for a five-year loan of $59,000. The interest rate is 7 percent per year, and the loan calls for equal annual payments. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.) Year BeginningBalance TotalPayment InterestPayment PrincipalPayment EndingBalance 1 $ $ $ $ $ 2 3 4 5 How much total interest is paid over the life of the loan? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Total interest paid $
A loan is to be amortized by n level annual payments of X where n > 5. You are given (1) The amount of interest in the first payment is 604.00 (2) The amount of interest in the third payment is 593.75 (3) The amount of interest in the fifth payment is 582.45 Calculate X.
A partially amortizing loan for $92,000 for 10 years is made at 6 percent interest. The lender and borrower agree that payments will be monthly and that a balance of $20,000 will remain and be repaid at the end of year 10. Required: a. Assuming 4 points are charged by the lender, what will be the yield if the loan is repaid at the end of year 10? b. What must the loan balance be if it is repaid after year 4? c. What will be the yield to the lender if the loan is repaid at the end of year 4? Note: For all requirements, do not round intermediate calculations, round your final answers to 2 decimal places.