The financial managers at Henderson Corporation are arranging the financing for working capital requirements for the upcoming year. Henderson'slocal bank offers a discount interest loan at a quoted (simple) interest rate of 12.00%. With a discount interest loan, interest is payable up front, andthe actual amount received is less than the face amount of the loan. Suppose Henderson applies for a $300,000 loan with a nine-month term.Calculate the interest payment, the amount of cash received, the annual percentage rate (APR), and the effective annual rate (EAR) of this loan.Interest paymentAmount of cash receivedAnnual percentage rate (APR)Effective annual rate (EAR)What is the nine-month rate if the bank charges a $100 processing fee?O 9.93%O 9.03%O 8.94%ValueO 13.19%

When the borrower borrows a loan from the lender, he has to pay a rate of interest on the borrowed…

Answered: The financial managers at Henderson…

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

See similar textbooks

Similar questions

Your supervisor has tasked you with evaluating several loans related to a new expansion project. Using the PVIFA table, determine the annual payment on a $450,000, 8% business loan from a commercial bank that is to be amortized over a five-year period. Show your work. Does this payment seem reasonable? Explain.
Company A is contemplating on borrowing $500,000 to start a business. Credit union 1 has offered to loan the company the money at an interest rate of 10% compounded monthly. Credit union 2 has offered the money with the stipulation that the company repays it by making monthly payments of $100,000 for 8 years. From which credit union should the company borrow the money? MANUAL CALCULATIONS AND CASH FLOW DIAGRAM!
You are in need of regular short term financing to support your business. Three options appear attractive: 1. A standard line of credit in the sum of $500,000 at 18% annual interest for the funds used. You have between $75,000 and $1000,000 in cash coming in in a typical month, and usual monthly expenses of $80,000. At the start of the loan period, you have $120,000 in accounts payable. 2. Your bank is also offering a $1,000,000 5 year loan at 12%, and a requirement to keep $150,000 of that loan in your bank account at all times. You only need to pay the interest each moth, and pay off the million dollar principal at the end of the loan. You have the same revenue and expense profile given above. 3. A factor is also willing to buy your accounts receivable as they come in. They will buy 90% of your receivables at an 80% of fave value. All of your revenue is business-to-business and therefore starts life as A/R. Your customers currently pay on average within 60 days, which the factor…
Mr. Smith takes out a $100,000.00 loan with an effective yearly interest rate of 10%. He must repay the debt over a 30-year period with consistent monthly payments that are due on the first of every month. What is Mr. Smith's monthly payment? Create a cashflow diagram.
Bhupatbhai
Mr. Pereira needs $1,000,000 today. He has quoted in the bank 3 types of loans with the following conditions:(a) 1 year term loan with annual rate of 12% capitalizable monthly, with monthly payments.b) 2-year term loan with an annual rate of 8%, capitalized bimonthly, with bimonthly payments.c) 4-year term loan with an annual rate of 6% capitalized quarterly with quarterly payments.As a consultant, you must evaluate these three alternatives today by calculating what the situation of the loans will be in month No. 6, asking to indicate at that date the value of interest paid and interest payable on the 3 loans, the value of the amortized capital and what remains to be amortized on these loans.
Please solve, show and explain steps. This is Engineering Economics.
Click to see additional instructions To provide funding for a particular project, a company decides to go for a loan worth GHC 200,000. The loan is to be paid at an interest rate of 18% per year in six annual installments starting from the beginning of the second year. The size of the equal payment needed each year is GHS
ABC Inc. asked your company for a 7-year loan of $50,000. The repayment of the loan will be as follows: ABC will pay $5,000 at the end of Year 1, $10,000 at the end of Year 2, and $15,000 at the end of Year 3, and fixed unspecified cash flow (assume X) at the end of each of the following years (Year 4 through Year 7). Assuming 8% as an appropriate rate of return on low risk but an illiquid 7-year loan. Find out the cash flow that this investment must provide at the end of each of the final 4 years (year 4 to year 7), that is, find out the X?
Wells Fargo Bank lent a newly graduated engineer $1,000 at i = 5 % per year for 4 years to buy home office equipment. From the bank's perspective (the lender), the investment in this young engineer is expected to produce an equivalent net cash flow of $ 282.01 for each of 4 years.This represents a 5 % per year rate of return on the bank's unrecovered balance. Compute the amount of the unrecovered investment for each of the 4 years using the rate of return, ROR, on: a. the unrecovered balance (the correct basis)
After completing a bachelors degree, you have $15,000.00 in student loans to pay back at an interest rate of 2.25% for 6 years. Follow the steps to show work used to calculate the monthly payment on this loan. Enter the values needed for the LEFT and RIGHT sides of the amortization formula. LOOK AT YOUR FORMULA SHEET. Be sure to use parentheses as shown in class and * to show multiplication: LHS: RHS: pymt. Hint Hint Now simplify the expressions from above and enter the final values for both sides below, keeping at least 6 decimal places: = pymt. Finish your calculation of the payment and enter your result, rounded to the nearest penny, in the table below. Then use the information to complete missing values in the table. SEE THE VIDEO BELOW IF YOU NEED HELP WITH THE TABLE (Round to the nearest cent) Month Monthly Payment Interest on Prior Balance Principle Outstanding Balance 1 2 3 Question Help: Video
e investment group borrows $20,000 from a CRDB bank at a 9% annual interest rate in order to buy a machine. In addition. The company pays a $200 loan origination fee when the loan commences. The CRDB bank offers two repayment plans, one with equal payments made at the end of every year for the next five years and the other with a single payment made after the loan period of five years. a)Draw cash flow diagram. b)Describe the repayment plans as required by the CRDB Bank. please do not provide handwritten solution

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

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

SEE MORE TEXTBOOKS