A company lends money to small businesses. The total amount per project is $ 50,000. The borrowers can benefit for once from this deal. Mr. Roger applies for a loan, and gets $ 40,000 according to his business' conditions. He needs $ 60,000 for his project, so he finances the needed money from his own money. The interest rate applied by the company on the loans is 5%, and Mr. Roger wants to remunerate himself for 3% on his own participation. Find the capital structure for the project of Mr. Roger What is the average cost of capital for Mr. Roger (in %) If Mr. Roger can repay only $ 30,000 to the company, what would be the credit risk for the company?
A company lends money to small businesses. The total amount per project is $ 50,000. The borrowers can benefit for once from this deal. Mr. Roger applies for a loan, and gets $ 40,000 according to his business' conditions. He needs $ 60,000 for his project, so he finances the needed money from his own money. The interest rate applied by the company on the loans is 5%, and Mr. Roger wants to remunerate himself for 3% on his own participation. Find the capital structure for the project of Mr. Roger What is the average cost of capital for Mr. Roger (in %) If Mr. Roger can repay only $ 30,000 to the company, what would be the credit risk for the company?
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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- A company lends money to small businesses. The total amount per project is $ 50,000. The borrowers can benefit for once from this deal. Mr. Roger applies for a loan, and gets $ 40,000 according to his business' conditions. He needs $ 60,000 for his project, so he finances the needed money from his own money. The interest rate applied by the company on the loans is 5%, and Mr. Roger wants to remunerate himself for 3% on his own participation.
- Find the capital structure for the project of Mr. Roger
- What is the average cost of capital for Mr. Roger (in %)
- If Mr. Roger can repay only $ 30,000 to the company, what would be the credit risk for the company?
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