The time value of money and loan amortization

Assignment Help Business Management

Reference no: EM132676880

Question 1. Discuss mortgage loans in terms of the time value of money and loan amortization. What important points should every homeowner know about how mortgages work? (Hint: Think about taxes and getting the mortgage paid off.)

Question 2. Preferred stock is said to be a hybrid of common stock and bonds. Explain fully. Describe the cash flows associated with preferred and their valuation.

Question 3. Ed Perez has always wanted to run his own restaurant. He worked part-time in the food service business during high school and college and has worked for a large restaurant chain since graduating from college four years ago. He's now ready to open a franchised family style restaurant. However, to get started, a large investment is required. Ed has saved some money, but will also have to secure a substantial loan.

Fortunately, Ed's old college roommate, Joe Dixon, is now a loan officer with the local bank. Besides being a good friend, Joe knows that Ed is a stable, hard-working businessman and an excellent credit risk. Ed is now meeting with Joe to apply for the loan. After exchanging pleasantries, Joe asks to see Ed's business plan. In response Ed tells him all about the idea and shows him the written information from the franchisor, which Joe glances at briefly.

Joe listens politely, leans back in his chair, and says, "Ed, I've known you for years. I'm sure this is a great idea, and that you'll make a terrific restaurateur, but we can't even begin to consider a loan until we see a fully developed business plan that looks at least five years into the future."

Why is Joe (the bank) insisting that Ed prepare a business plan?

What will it show the bank?

List some specific concerns that the bank might have that a plan would answer outside of the financial section.

List several concerns that the financial plan might answer for the bank.

Why is the bank insisting on such a long planning horizon? Does that imply the bank is looking for a strategic plan?

What will preparing a business plan do for Ed?

Before he gets started.

After he gets started.

What will he learn by doing the financial plan?

What kind of thinking is the bank looking for in Ed's plan? That is, should the plan be strategic or operational or very short term?

Reference no: EM132676880

Questions Cloud

Trends in the firm external environment : Reflect an analysis of the selected company's current situation, including trends in the firm's external environment and whether these trends are threats

How much will internal failure costs change : Metropolitan Manufacturing expects to spend $400,000 in 20x4 in appraisal costs. How much will internal failure costs change

Compete effectively in street vending industry : Discuss 2 resources and 2 capabilities that are required to compete effectively in the street vending industry.

What is consolidated net income for the year : The carrying amounts of Sherwood's assets and liabilities equaled their fair values except for its equipment, What is consolidated net income for the year

The time value of money and loan amortization : Discuss mortgage loans in terms of the time value of money and loan amortization.

Create risk mitigation plan : In your role as a Project Manager for Kingston-Bryce Limited you have been assigned to create a risk mitigation plan.

Competitive and desirable total rewards system : Describe the elements to a competitive and desirable total rewards system. What external influences affect a Total Rewards system?

Corporate finance-capital outlay : A project is defined as any endeavor that had a capital outlay. Describe relationship between risk and return and how you would measure for both in your project

Public budgeting and finance : In order to fully explore this important concept, we will return to our selected department or governmental agency.

User Account

All Pages