Anderson Manufacturing Co., a small fabricator of plastics, needs to purchase an extrusion molding machine for $140,000. Kersey will borrow money from a bank at an interest rate of 13% over five years. Anderson expects its product sales to be slow during the first year, but to increase subsequently at an annual rate of 9%. Anderson therefore arranges with the bank to pay off the loan on a "balloon scale," which results in the lowest payment at the end of the first year and each subsequent payment being just 9% over the previous one. Determine the five annual payments.

Automotive Accessories needs to borrow $135,000 for 6 months for renovations. It is considering two financing options: Bank Helping Hand offers an 8% annual rate subject to a 10% compensating balance. Bank Friendly Financer offers the funds as a discount loan with an annual rate of 8%. Automotive Accessories maintains no deposit balances in either bank, and repayment will be a single lump sum at maturity. a.What is the effective annual rate of interest on each loan? b.What can Automotive Accessories do to reduce the interest rates on these loans?

An auto dealer has designed a marketing gimmick. They are asking their customers to pay only $119 at the end of each month, for the first two years for a car priced at $12,000. The APR on the vehicle is 5.04% and the total term of the loan is 5 years. What is the monthly payment for the remaining three years? Interest is payable during the entire five year period.

Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $2.5 million. The property is projected to produce a first year NOI of $200,000. The lender will allow only up to an 80 percent loan on the property and requires aDCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 10 percent at the beginning of each year for five years. The contract rate of interest on the loan is 12 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period.a. What will the balloon payment be at the end of the fifth year?b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?

Ace Development Company is trying to structure a loan with the First National Bank.  Ace would like to purchase a property for $2.5 million.  The property is projected to produce a first year NOI of $200,000.  The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25.  All loan payments are to be made monthly, but will increase by 10% at the beginning of each year for five years.  The contract rate of interest on the loan is 12%.  The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period.  What will the balloon payment be at the end of the fifth year (rounded to the nearest dollar)?   Question 11 options:

ABC Company is considering to establish a line of credit with a local bank to make up for the cash deficit for the next three months. The company expects a 60% chance for a $280,100 deficit and a 40% chance for no deficit at all. The line of credit charges 0.60% of interest rate per month on the amount borrowed plus a commitment fee of $2,500 for a quarter. It also requires a 5% compensation balance for outstanding loans. The company can reinvest any excess cash at an annual rate of 8%. What will the expected cost of establishing a line of credit be? Round your answer to the nearest dollar. (Hint: Refer to a numerical example in short-term financing choices.) Group of answer choices $5,671 $5,678 $5,699 $5,684 $5,692

Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $430,000. The company can borrow $430,000 for three years at 13 percent annual interest or for one year at 11 percent annual interest. Assume interest is paid in full at the end of each year. a. How much would Sauer Food Company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 11 percent rate? Compare this to the 13 percent three- year loan. 11 percent loan 13 percent loan Interest savings Interest b. What if interest rates on the 11 percent loan go up to 16 percent in year 2 and 19 percent in year 3? What would be the total interest cost compared to the 13 percent, three-year loan? Fixed-rate 13% loan Variable-rate loan Additional interest cost Interest

Halliday Inc. receives a $2 million payment once a year. Of this amount, $700,000 is needed for cash payments made during the next year. Each time Halliday deposits money in its account, a charge of $2.00 is assessed to cover clerical costs. If Halliday can hold marketable securities that yield 5 percent, and then convert these securities to cash at a cost of only the $2 deposit charge, what is the total cost for one year of holding the minimum cost cash balance according to the Baumol model?

Sauer Food Company has decided to buy a new computer system with an expected life of three years. The cost is $290,000. The company can borrow $290,000 for three years at 11 percent annual interest or for one year at 9 percent annual interest. Assume interest is paid in full at the end of each year. a. How much would Sauer Food Company save in interest over the three-year life of the computer system if the one-year loan is utilized and the loan is rolled over (reborrowed) each year at the same 9 percent rate? Compare this to the 11 percent three-year loan. 9 percent loan 11 percent loan Interest savings Interest b. What if interest rates on the 9 percent loan go up to 14 percent in year 2 and 17 percent in year 3? What would be the total interest cost compared to the 11 percent, three-year loan? Fixed-rate 11% loan Variable-rate loan Additional interest cost Interest

Ace Development Company is trying to structure a loan with the First National Bank. Ace would like to purchase a property for $3.25 million. The property is projected to produce a first year NOI of $125,000. The lender will allow only up to an 80 percent loan on the property and requires a DCR in the first year of at least 1.25. All loan payments are to be made monthly but will increase by 3.5 percent at the beginning of each year for five years. The contract rate of interest on the loan is 5.5 percent. The lender is willing to allow the loan to negatively amortize; however, the loan will mature at the end of the five-year period. Excel calculation would be appreciated! a. What will the balloon payment be at the end of the fifth year? b. If the property value does not change, what will the loan-to-value ratio be at the end of the five-year period?