XYZ Company is building an addition (building and machinery) to its manufacturing plant to increase its production capacity. The cost of the addition is $1,230,000. Its lender is willing to make a loan to the company at 70% loan to value, for 20 years, payments made monthly, and at an interest rate of 5% APR. a. How much of the total cost is CAPEX and how much of the total cost is OPEX? b. How much cash must the company have to make the down payment? c. What is the monthly payment?

XYZ Company is building an addition (building and machinery) to its manufacturing plant to increase its production capacity. The cost of the addition is $1,230,000. Its lender is willing to make a loan to the company at 70% loan to value, for 20 years, payments made monthly, and at an interest rate of 5% APR. a. How much of the total cost is CAPEX and how much of the total cost is OPEX? b. How much cash must the company have to make the down payment? c. What is the monthly payment?

Name: XYZ Company is building an addition (building and machinery) to its ma
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Description: XYZ Company is building an addition (building and machinery) to its manufacturing plant to increase its production capacity. The cost of the addition is $1,230,000. Its lender is willing to make a loan to the company at 70% loan to value, for 20 ye

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8MC: Grummet Company is acquiring a new wood lathe with a cash purchase price of $80,000. The Wood Master...

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XYZ Company is building an addition (building and machinery) to its manufacturing plant to increase its production capacity. The cost of the addition is $1,230,000. Its lender is willing to make a loan to the company at 70% loan to value, for 20 years, payments made monthly, and at an interest rate of 5% APR. a. What is the total amount of monthly payments? b. What will be the total amount of interest paid on this loan? c. How much of the first monthly payment will be interest and how much of the last monthly payment will be interest?
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