Person M, person P, and person V want to enter into a franchise arrangement. According to them, it would help in upliftment of business and they would get support of experienced companies. To find: Person M, person P, and person V should consider the positive and negative aspects of franchising before committing themselves to a particular franchise.

Question

A company has decided to purchase equipment, needing to borrow $100,000 from its local bank to make the purchase. The bank gives the company two options: (a) 60-month installment note with 4% interest or (b) 120-month installment note with 8% interest. Lenders often charge a higher interest rate for longer-term loans to compensate for additional risk of lending for a longer time period. Record $100,000 cash received from the issuance of the 120-month installment note with 8% interest.Record $100,000 cash received from the issuance of the 120-month installment note with 8% interest. Select the options to display a 120-month installment note with 12% interest. How much of the principal amount is due after the 60th payment?

Answer 1

Question

Chapter 16, Problem 2BS

Summary Introduction

Case summary: Person M, person P, and person V want to enter into a franchise arrangement. According to them, it would help in upliftment of business and they would get support of experienced companies.

To find: Person M, person P, and person V should consider the positive and negative aspects of franchising before committing themselves to a particular franchise.

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A company has decided to purchase equipment, needing to borrow $100,000 from its local bank to make the purchase. The bank gives the company two options: (a) 60-month installment note with 4% interest or (b) 120-month installment note with 8% interest. Lenders often charge a higher interest rate for longer-term loans to compensate for additional risk of lending for a longer time period. Record $100,000 cash received from the issuance of the 120-month installment note with 8% interest.Record $100,000 cash received from the issuance of the 120-month installment note with 8% interest. Select the options to display a 120-month installment note with 12% interest. How much of the principal amount is due after the 60th payment?

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