A start-up company that makes robotic hardware for CIM (computer integrated manufacturing) systems borrowed $1 million to expand its packaging and shipping facility. The contract required the company to repay the lender through an innovative mechanism called “faux dividends,” a series of uniform annual payments over a fixed period of time. If the company paid $290,000 per year for 5 years, what was the interest rate on the loan?

A start-up company that makes robotic hardware for CIM (computer integrated manufacturing) systems borrowed $1 million to expand its packaging and shipping facility. The contract required the company to repay the lender through an innovative mechanism called “faux dividends,” a series of uniform annual payments over a fixed period of time. If the company paid $290,000 per year for 5 years, what was the interest rate on the loan?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

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Calculating the Return On A Loan

Question

A start-up company that makes robotic hardware
for CIM (computer integrated manufacturing) systems
borrowed $1 million to expand its packaging
and shipping facility. The contract required the
company to repay the lender through an innovative
mechanism called “faux dividends,” a series of
uniform annual payments over a fixed period of
time. If the company paid $290,000 per year for
5 years, what was the interest rate on the loan?

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