Dealers effective rate of return on this loan transaction

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Problem 1. You are going to buy a new car worth $24,500. The dealer computes your monthly payment to be $514.55 for 60 months of financing. What is the dealer’s effective rate of return on this loan transaction?

Problem 2. Agdist Corporation distributes agricultural equipment. The board of directors is considering a proposal to establish a facility to manufacture an electronically controlled "intelligent" crop sprayer invented by a professor at a local university. This crop-sprayer project would require an investment of $10 million in assets and would produce an annual after-tax net benefit of $1.8million over a service life of eight years. All costs and benefits are included in these figures. When the project terminates, the net proceeds from the sale of the assets would be $1 million. Compute the rate of return of this project. Is this a good project at MARR = 10%?

Reference no: EM13832575

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