How much would have to pay every quarter to cover the loan

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Reference no: EM132875072

Our company has been mainly producing parts for cars with combustion engines. We are facing a challenging time. Potential shifting trends towards electric automobiles had apparently caused a reduction in our demand, that has been decreasing during the last years. In order to adapt to the future circumstances, the following different scenarios are being considered:

Changing the production line to adapt to the electric automobile market.
Investing in different projects to adapt to the new situation.
Selling the company before facing severe losses.

We were considering adapting our production line, in order to produce some parts for electric automobiles, this way, and after analyzing the possible market opportunities, we could expect to obtain net revenues of $50,000 per month for at least the next 12 years.

Problem a) What is the maximum that we should invest on this project if we consider a cost of capital of 4%?

Problem b) If we ask for a loan of 5,000,000 at an annual interest rate of 1% compounded quarterly, to be paid in 10 years, how much would you have to pay every quarter to cover the loan?

Reference no: EM132875072

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