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Which loan will have the lowest total payback amount

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Reference no: EM132915331

McCormick & Company has decided in order for the company to have a minimal impact on current cash flows, the company will need to borrow seventy percent (70%) Loan to Value (LTV) of the $4,242,000.00 offer in the form of a commercial acquisition and development loan to purchase the land. This means McCormick & Company will need to make a thirty percent (30%) down payment to secure the commercial acquisition and development loan.

McCormick & Company is considering three different loan options:

Loan A: 20-year loan with a fixed annual interest rate of 6 percent

Loan B: 10-year loan with a fixed annual interest rate of 4.5 percent

Loan C: 15-year loan with a fixed annual interest rate of 5 percent

Problem 1: How much of the total $4,242,000.00 offer will be financed?

Problem 2: Which loan will have the lowest monthly payment?

Problem 3: Which loan will have the lowest total payback amount?

Problem 4: Would you recommend McCormick & Company select the loan with lowest monthly payment or lowest total payment and why?

Reference no: EM132915331

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