Howard owns a small electronics repair shop. He wants to borrow $10,000 now and repay over the next 1 or 2 years. He believes that new diagnostic test equipment will allow him to work on a wider variety of electronic items and increase his annual revenue. Howard received 2-year repayment options from banks A and B. Amount to pay, $ per year Year Bank A Bank B 1 -5,378.05 -5,000.00 2 -5,378.05 -5,775.00 Total paid -10,756.10 -10,775.00 After reviewing these plans, Howard decided that he wants to repay the $10,000 after only 1 year based on the expected increased revenue. During a family conversation, Howard's brother-in-law offered to lend him the $10,000 now and take $10,600 after exactly 1 year. Now Howard has three options and wonders which one to take. Which one is economically the best?
Howard owns a small electronics repair shop. He wants to borrow $10,000 now and repay over the next 1 or 2 years. He believes that new diagnostic test equipment will allow him to work on a wider variety of electronic items and increase his annual revenue. Howard received 2-year repayment options from banks A and B. Amount to pay, $ per year Year Bank A Bank B 1 -5,378.05 -5,000.00 2 -5,378.05 -5,775.00 Total paid -10,756.10 -10,775.00 After reviewing these plans, Howard decided that he wants to repay the $10,000 after only 1 year based on the expected increased revenue. During a family conversation, Howard's brother-in-law offered to lend him the $10,000 now and take $10,600 after exactly 1 year. Now Howard has three options and wonders which one to take. Which one is economically the best?
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
Related questions
Question
100%
Transcribed Image Text:Howard owns a small electronics repair shop. He wants to borrow $10,000 now and repay it
over the next 1 or 2 years. He believes that new diagnostic test equipment will allow him to
work on a wider variety of electronic items and increase his annual revenue. Howard received
2-year repayment options from banks A and B.
Amount to pay, $ per year
Year
Bank A
Bank B
1
-5,378.05
-5,000.00
2
-5,378.05
-5,775.00
Total paid
-10,756.10
-10,775.00
After reviewing these plans, Howard decided that he wants to repay the $10,000 after only
1 year based on the expected increased revenue. During a family conversation, Howard's
brother-in-law offered to lend him the $10,000 now and take $10,600 after exactly 1 year.
Now Howard has three options and wonders which one to take. Which one is economically
the best?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education