Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...
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please show the cash flow diagram and the complete solution. thank you..

Transcribed Image Text:An entrepreneur needs thousands of dollars to launch the global expansion of his software
business. I have agreed to lend him the money today (n=0) at an interest rate of 15% compounded
continuously. I required that the loan be repaid in eight annual payments starting at Year 3 with a
$20K payment. Subsequent payments will decrease by $1K each year thereafter. (1) What is the
present value of the money being borrowed? (2) Convert your Present Value to Annual Payment.
ieff = ?
POTotal = ?
A/POTotal = ?
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