Does the term of the loan make a difference

Assignment Help Financial Management

Reference no: EM131445325

A company wants to choose from 3 products.

Product 1 cost $27,000 and has a salvage value of $300

Product 2 cost $19,000 and has a salvage value of $250

Product 3 cost $21,000 and has a salvage value of $350

If we finance product 1 at 10% APR, 5% for Product 2 and 0% for Product 3, which unit would they pick? Compare the present values of each project. Does the term of the loan make a difference?

Compute the PV of each of the three products for 1 through 10 years. Each year to show a PV.

Reference no: EM131445325

Questions Cloud

Balance sheet analysis : BALANCE SHEET ANALYSIS Complete the balance sheet and sales information using the following financial data: Total assets turnover: 1.2x. Calculation is based on a 365-day year.

What is edelmans market and book ratio : Edelman Engines has $15 billion in total assets. Its balance sheet shows $0.75 billion in current liabilities, $10.5 billion in long-term debt, and $3.75 billion in common equity. It has 500 million shares of common stock outstanding, and its stock p..

Calculate its basic earning power-return on invested capital : Broward Manufacturing recently reported the following information: Net income $345,000 ROA 11% Interest expense $138,000 Accounts payable and accruals $1,050,000 Broward's tax rate is 30%. Calculate its basic earning power (BEP), its return on equity..

Return on equity : Commonwealth Construction (CC) needs $1 million of assets to get started, and it expects to have a basic earning power ratio of 20%. CC will own no securities, so all of its income will be operating income. If it so chooses, CC can finance up to 35% ..

Does the term of the loan make a difference : If we finance product 1 at 10% APR, 5% for Product 2 and 0% for Product 3, which unit would they pick? Compare the present values of each project. Does the term of the loan make a difference? Compute the PV of each of the three products for 1 through..

What is the effective annual interest on this mortgage : You have just taken out a 30-year, $120,000 mortgage on your new home. This mortgage is to be repaid in 360 equal installments. Each monthly payment is $1,500. What is the effective annual interest on this mortgage? What APR would make you indifferen..

The investment will be depreciated straight line : The initial investment in the project will be $21 million, and the investment will be depreciated straight line, down to a salvage value of $9 million at the end of the fourth year. The revenues are expected to be $24 million next year and to grow 5%..

Sufficient to maintain the long-standing policy : The manager of a municipal ice rink is concerned that the flow of patrons will not be sufficient to maintain the long-standing policy of keeping the rink on a self-supporting basis. Revenues come mainly from the hourly rental of ice time (the city ha..

What is the duration of a two-year zero-coupon bond : What is the duration of a two-year bond that pays an annual coupon of 10.1 percent and has a current yield to maturity of 12.1 percent? Use $1,000 as the face value. What is the duration of a two-year zero-coupon bond that is yielding 11.5 percent?

User Account

All Pages