Reference no: EM131788324
Question: Twelve years ago, the Archer Corporation borrowed $6,000,000. Since then, cumulative inflation has been 80 percent (a compound rate of approximately 5 percent per year).
a. When the firm repays the original $6,000,000 loan this year, what will be the effective purchasing power of the $6,000,000?
b. To maintain the original $6,000,000 purchasing power, how much should the lender be repaid?
c. If the lender knows he will receive only $6,000,000 in payment after 12 years, how might he be compensated for the loss in purchasing power? A descriptive answer is acceptable.
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