Robinson Co. is interested in purchasing a new delivery vehicle so it can become a subcontractor with Amazon Logistics. The vehiclewould cost $187,500 and generate delivery revenue of $50,000 for each of the next 6 years. If Robinson Co. purchases the vehicle, itwill take a loan for $150,000. The terms of the loan stipulate that 2% annual interest would be charged and that the loan would berepaid in 6 equal end of year payments. At the end of the 6 years, the vehicle will have a salvage value of $5,000. The tax rate is 40%.Assuming that the vehicle is depreciated using MACRS (5-year property class) and that Robinson Co. uses an after-tax MARR of 10%,compute the PW and determine whether Robinson Co. should purchase the new business vehicle.Click here to access the TVM Factor Table calculator.Click here to access the MACRS-GDS Property Classes.Click here to access the MACRS-GDS percentages page.Click here to access the MACRS-GDS percentages for 27.5-year residential rental property.$Carry all interim calculations to 5 decimal places and then round your final answer to a whole number. The tolerance is ±10.Should Robinson Co. purchase the new delivery vehicle?

.Part 2: Explanation:Step 1: Calculate the Annual Cash Flows:First, let's calculate the annual cash…

Answered: Robinson Co. is interested in…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 19P

See similar textbooks

Similar questions

1
Pearl Excavating Inc. is purchasing a bulldozer. The equipment has a price of $92,800. The manufacturer has offered a payment plan that would allow Pearl to make 10 equal annual payments of $16,424.13, with the first payment due one year after the purchase. Pearl could borrow $92,800 from its bank to finance the purchase at an annual rate of 9%. Should Pearl borrow from the bank or use the manufacturer’s payment plan to pay for the equipment? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 7%.) Manufacturer's rate %
Coronado Excavating Inc. is purchasing a bulldozer. The equipment has a price of $107,400. The manufacturer has offered a payment plan that would allow Coronado to make 10 equal annual payments of $17,500.00, with the first payment due one year after the purchase. How much total interest will Coronado pay on this payment plan? Coronadocould borrow $107,400 from its bank to finance the purchase at an annual rate of 9%. Should Coronado borrow from the bank or use the manufacturer's payment plan to pay for the equipment?
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.25 million. The property is projected to produce a first year NOI of $125,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Excel calculation would be appreciated! a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.25 million. The property is projected to produce a first year NOI of $125,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Required: a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.50 million. The property is projected to produce a first year NOI of $140,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Required: a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period? Complete this question by entering your answers in the tabs below. Required A Required B What will the balloon payment be at the end of the fifth year? (Do not round…
You want to purchase an office building in Brooklyn that is expected to generate $475554 net operating income (NOI) in the following year. You decide you want to take out a loan to finance the purchase of this property. It will be an IO loan at a rate of 6.82%, compounded annually, with annual payments. The lender will provide financing up to a minimum Debt Service Coverage Ratio (DSCR) of 1.2 based off the next year's NOI. What is the largest loan amount the lender will allow you to take based on the DSCR requirement? State your answer as a number rounded to the nearest cent (e.g. if you get $13.57654, write 13.58)
Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $2.5 million. The property is projected to produce a first year NOI of $200,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly, but will increase by 10% at the beginning of each year for five years. The contract rate of interest on the loan is 12%. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. What will the balloon payment be at the end of the fifth year (rounded to the nearest dollar)? Question 11 options:
Roger Sterling has decided to buy an ad agency and is going to finance the purchase with seller financing—that is, a loan from the current owners of the agency. The loan will be for $2 million financed at an APR of 7 percent compounded monthly. This loan will be paid off over 5 years with end-ofmonth payments, along with a $500,000 balloon payment at the end of year 5. That is, the $2 million loan will be paid off with monthly payments, and there will also be a final payment of $500,000 at the end of the final month. How much will the monthly payments be?
Roger Sterling has decided to buy an ad agency and is going to finance the purchase with seller financing-that is, a loan from the current owners of the agency. The loan will be for 2,100,000 financed at an APR of 8 percent compounded monthly. This loan will be paid off over 7 years with end o month payments, along with a 600,000 balloon payment at the end of year 7. That is, the 2.1 million loan will be paid off with monthly payments, and there will also be a final payment of 600,000 at the end of the final month. How much will the monthly payments be?
A buyer is considering purchasing a 10-acre parcel in Peoria, Arizona for economic development. The parcel has a sales price of $720,000. The buyer agrees with the seller for purchasing the property with 15% down up front and paying off the balance in 12-months. If a bank is willing to provide 3% annual interest, compounded monthly, how much should the monthly deposit be into that account to pay off the desired balance to the seller?
A manufacturer needs to borrow money to purchase a building. The purchase price of thebuilding is $1.5 million, and the company will put $300,000 in cash down at closing. If thecompany can borrow the difference from its bank at 4.85% for 20 years, what will the monthlyprincipal and interest payment of the loan be? Create an amortization schedule also.

SEE MORE QUESTIONS

Recommended textbooks for you

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

EBK CONTEMPORARY FINANCIAL MANAGEMENT

Finance

ISBN:

9781337514835

Author:

MOYER

Publisher:

CENGAGE LEARNING - CONSIGNMENT

SEE MORE TEXTBOOKS