Hansus Enterprises is a start-up small business specializing in software systems for machine based high-school student tutoring in science and math. Sheryl Hansus, the owner, has spoken with lenders to obtain a loan of $50,000 now (year 0), and the same amount in years 3 and 6. Two different repayment schedules are available. They are: Schedule A: Pay a uniform amount of $19,500 in years 3 through 12. Schedule B: Pay a uniform amount of $20,000 in years 1 through 6, with "balloon" payments of an additional $20,000 in year 2 and a final amount of $40,000 in year 7. To assist in the decision of which schedule to select, determine the following: (a) Total amount repaid for each schedule. Which is smaller? Use MS Excel to arrive at your decision. (b) The equivalent annual worth of the loan amounts and of the repayments at i = 5% per year over a 12-year evaluation period. Which schedule has the smaller loss per year? Why is this the case? Use MS Excel to arrive at your decision.
Hansus Enterprises is a start-up small business specializing in software systems for machine based high-school student tutoring in science and math. Sheryl Hansus, the owner, has spoken with lenders to obtain a loan of $50,000 now (year 0), and the same amount in years 3 and 6. Two different repayment schedules are available. They are: Schedule A: Pay a uniform amount of $19,500 in years 3 through 12. Schedule B: Pay a uniform amount of $20,000 in years 1 through 6, with "balloon" payments of an additional $20,000 in year 2 and a final amount of $40,000 in year 7. To assist in the decision of which schedule to select, determine the following: (a) Total amount repaid for each schedule. Which is smaller? Use MS Excel to arrive at your decision. (b) The equivalent annual worth of the loan amounts and of the repayments at i = 5% per year over a 12-year evaluation period. Which schedule has the smaller loss per year? Why is this the case? Use MS Excel to arrive at your decision.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please show neat hand calculations and neat Excel sheets when needed.
Q1. Hansus Enterprises is a start-up small business specializing in software systems for machine based high-school student tutoring in science and math. Sheryl Hansus, the owner, has spoken with lenders to obtain a loan of $50,000 now (year 0), and the same amount in years 3 and 6.
Two different repayment schedules are available. They are:
Schedule A: Pay a uniform amount of $19,500 in years 3 through 12.
Schedule B: Pay a uniform amount of $20,000 in years 1 through 6, with "balloon" payments of an additional $20,000 in year 2 and a final amount of $40,000 in year 7.
To assist in the decision of which schedule to select, determine the following:
(a) Total amount repaid for each schedule. Which is smaller? Use MS Excel to arrive at your decision.
(b) The equivalent annual worth of the loan amounts and of the repayments at i = 5% per year over a 12-year evaluation period. Which schedule has the smaller loss per year? Why is this the case? Use MS Excel to arrive at your decision.
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