6. A company wishes to borrow $7 500000 for 8 years. One source will lend the money at j2 = 9% if it is amortized by semi-annual payments. A second source will lend the money at j2 = 7.6% if only the interest is paid semi-annually and the principal is returned in a lump sum at the end of 5 years. If the second source is used, in order to pay back the principal, a sinking fund will be established by semi-annual deposits that accumulate at j2 = 3.9%. %3D (a) What is the semi-annual cost under the amortization plan? (b) What is the semi-annual cost under the sinking fund plan? (c) Which plan should the company choose, and how much can they save semi- annually by using the better plan?

6. A company wishes to borrow $7 500000 for 8 years. One source will lend the money at j2 = 9% if it is amortized by semi-annual payments. A second source will lend the money at j2 = 7.6% if only the interest is paid semi-annually and the principal is returned in a lump sum at the end of 5 years. If the second source is used, in order to pay back the principal, a sinking fund will be established by semi-annual deposits that accumulate at j2 = 3.9%. %3D (a) What is the semi-annual cost under the amortization plan? (b) What is the semi-annual cost under the sinking fund plan? (c) Which plan should the company choose, and how much can they save semi- annually by using the better plan?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

6. A company wishes to borrow $7500 000 for 8 years. One source will lend the money
at j2
= 9% if it is amortized by semi-annual payments. A second source will lend
the money at j2
returned in a lump sum at the end of 5 years. If the second source is used, in order
to pay back thel principal, a sinking fund will be established by semi-annual deposits
that accumulate at j2 = 3.9%.
= 7.6% if only the interest is paid semi-annually and the principal is
(a) What is the semi-annual cost under the amortization plan?
(b) What is the semi-annual cost under the sinking fund plan?
(c) Which plan should the company choose, and how much can they save semi-
annually by using the better plan?

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5.-DO IT IN EXCEL, AND SHOW THE FORMULASThe company purchases a machine, its cost of $726,000 will be financed with a loan at 13.8% interest for three years that requires equal semi-annual payments (annuities) that include principal and interest. What is the amount of the payment? A) $185,674.92 B) None of these amounts C) $311,662.137 D) $151,841.86 (Choose one option) D) $151,841.86
Vinay
1. (From section 6.1) SouthWestern airlines sets up a sinking fund so that they will have $75,500 to pay for a replacement piece of equipment in 15 years when the current equipment will be sold for scrap. If they make deposits into the account at the beginning of every 3 months for 15 years, and the investment account pays 4.4% interest compounded every 3 months, what will the quarterly deposit be to reach their goal? (a) Which formula will you use? Circle one. Annuity Payout-Annuity (b) What are the following variables that we will need for the formula? PMT = n = t = A or Po = r = (c) Write the formula you will use with the numbers plugged in below. (d) Solve using your calculator or technology and round to two decimal places. Work is not required here. Write the answer here and state which variable you solved for. (e) Using your own words, describe what you found by solving the equation in terms of the word problem given.
Mf6. Please give only typed answer.
H5. Smith Development Co. contracted a 30-year FRM loan with monthly amortization of $1.5 million at an interest rate of 13% five years ago. John Smith, a partner, just talked to a loan officer and learned that he can refinance the current balance on the loan at interest rate of 12% for a FRM amortized over 25 years. However, he also estimated the total refinancing cost to be $50,000. If Smith Development Co. holds the mortgage debt for 25 more years, would you recommend them to refinance? What if it holds for three years?
A company has had record profits and decided to use some of the profits to pay for manufacturing improvements. If the company can invest $1,600,000.00 in an a annuity will that will make payments at the beginning of every six months for 4 years. If the annuity pays 5.6%, compounded semi-annual. What is the size of payments that the company can expect?The payment amount will be $. (Round to 2 decimal places.)
Jones Assoc. borrowed $40,000. The company plans to set up a sinking fund that will pay back the loan at the end of 8 years. Assuming a rate of 12 percent compounded semiannually, the amount to be paid into the fund each period is: (Use the tables in the textbook.) O a. $17,185.20 Ob.$15,580.00 Oc. $1,718.52 O d. $1,560.00 Moving to another question will save this response. «
Hi, I am unsure how to solve this multi-step corporate finance problem
(a) Cheyenne Inc. has $470,000 to invest. The company is trying to decide between two alternative uses of the funds. One alternative provides $70,044 at the end of each year for 10 years, and the other is to receive a single lump-sum payment of $1,459,750 at the end of the 10 years. Which alternative should Cheyenne select? Assume the interest rate is constant over the entire investment. eTextbook and Media Save for Later Attempts: 0 of 3 used Submit Answer
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