Farmer Belle grows Christmas trees which mature over 5 years, and have a maturity value of $40 per tree. Belle has 12,000 trees and applies for a loan for working capital. Wee Bank agrees to loan Belle 70% of the present value of the maturity value of the trees, with equal payments to be made, starting today, at the beginning of each of the next 4 years. The interest rate is 5%. What is the present value of the maturity value of the trees, and the total amount that can be borrowed? Assume that the amount that Belle can borrow is $262,750. How much can be withdrawn from the bank each of the 4 years given the interest rate? Note: amounts are rounded to the nearest dollar, based on table values.
Farmer Belle grows Christmas trees which mature over 5 years, and have a maturity value of $40 per tree. Belle has 12,000 trees and applies for a loan for working capital. Wee Bank agrees to loan Belle 70% of the present value of the maturity value of the trees, with equal payments to be made, starting today, at the beginning of each of the next 4 years. The interest rate is 5%. What is the present value of the maturity value of the trees, and the total amount that can be borrowed? Assume that the amount that Belle can borrow is $262,750. How much can be withdrawn from the bank each of the 4 years given the interest rate? Note: amounts are rounded to the nearest dollar, based on table values.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Farmer Belle grows Christmas trees which mature over 5 years, and have a maturity value of $40 per tree. Belle has 12,000 trees and applies for a loan for
Assume that the amount that Belle can borrow is $262,750. How much can be withdrawn from the bank each of the 4 years given the interest rate? Note: amounts are rounded to the nearest dollar, based on table values.
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