Your boss has asked you to evaluate the economic viability of refinancing a loan on your plant’s process equipment. The original loan of $500,000 was for six years. The payments are monthly and the nominal interest rate on the current loan is 6% per year. As of the present time, your company has had the loan for 24 months. The new loan would be for the current balance (i.e., the balance at the end of the 24th month on the old loan) with monthly payments at a nominal interest rate of 3% per year for four years. A one-time financing fee for the new loan is $10,000. Your company’s MARR is 12% per year on a nominal basis. Determine if the new loan iseconomically advantageous.
Your boss has asked you to evaluate the economic viability of refinancing a loan on your plant’s process equipment. The original loan of $500,000 was for six years. The payments are monthly and the nominal interest rate on the current loan is 6% per year. As of the present time, your company has had the loan for 24 months. The new loan would be for the current balance (i.e., the balance at the end of the 24th month on the old loan) with monthly payments at a nominal interest rate of 3% per year for four years. A one-time financing fee for the new loan is $10,000. Your company’s MARR is 12% per year on a nominal basis. Determine if the new loan is
economically advantageous.
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