Problem 18-6 NPV of Loans The CFO of Kendrick Enterprises, is evaluating a 10-year, 7 percent loan with gross proceeds of $5,800,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be 2.7 percent of gross proceeds and will be amortized using a straight-line schedule over the 10-year life of the loan. The company has a tax rate of 22 percent and the loan will not increase the risk of financial distress for the company. a. Calculate the net present value of the loan excluding flotation costs. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Calculate the net present value of the loan including flotation costs. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Net present value b. Net present value

Problem 18-6 NPV of Loans The CFO of Kendrick Enterprises, is evaluating a 10-year, 7 percent loan with gross proceeds of $5,800,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be 2.7 percent of gross proceeds and will be amortized using a straight-line schedule over the 10-year life of the loan. The company has a tax rate of 22 percent and the loan will not increase the risk of financial distress for the company. a. Calculate the net present value of the loan excluding flotation costs. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Calculate the net present value of the loan including flotation costs. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Net present value b. Net present value

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 15P

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Problem 18-6 NPV of Loans The CFO of Kendrick Enterprises, is evaluating a 10-year, 7 percent loan with gross proceeds of $5,800,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be 2.7 percent of gross proceeds and will be amortized using a straight-line schedule over the 10-year life of the loan. The company has a tax rate of 22 percent and the loan will not increase the risk of financial distress for the company. a. Calculate the net present value of the loan excluding flotation costs. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Calculate the net present value of the loan including flotation costs. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Net present value 627,346.30 b. Net present value $ 574,551.45 ×
QUESTION 7 A company receives a 5-year $100 million loan commitment from Wells Fargo at a fixed rate of 4.5%. The up-front commitment fee is 40 basis points and the unused portion of the loan is charged 15 basis points. The bank borrows a total of $45 million at the beginning of the year and none thereafter. The following is true, except: The interest paid on the drawdown amount for the full year is $2,025,000. The interest rate paid on the drawdown amount for the full year is 4.90% The fee for the loan commitment for the full year is $400,000. The fee for the unused portion of the loan commitment for the full year is $82,500 QUESTION 8 A bank agrees to buy three-month forward €500,000 at $1.14/€ from its client and simultaneously sells three-month €500,000 at…
Problem 12-8 A borrower and lender negotiate a $37,000,000 interest-only loan at a 5.0 percent interest rate for a term of 15 years. There is a lockout period of 10 years. Should the borrower choose to prepay this loan at any time after the end of the 10th year, a yield maintenance fee (YMA) will be charged. The YMF will be calculated as follows: A treasury security with a maturity equal to the number of months remaining on the loan will be selected, to which a spread of 100 basis points (1.00%) will be added to determine the lender's reinvestment rate. The penalty will be determined as the present value of the difference between the original loan rate and the lender's reinvestment rate. Required: a. How much will the YMF be if the loan is repaid at the end of year 13 if two year treasury rates are 3 percent? If two-year treasury rates are 4.5 percent, what will be the lender's reinvestment rate? Note: Do not round intermediate calculations. Round "YMF" to the nearest dollar amount.…
13 The debt of PLN 15,000 is to be paid in four annual installments. It was agreed that the first three payment amounts would be paid as follows: A_1=8000 USD A_2=6000 USD A_3=9000 USDA_4 = ? The nominal interest rate is 40%. Determine the amount of the fourth payment and make an amortization plan for this loan.
PROBLEM 1 On December 31, 2023, JFG Company, a financing institution, lent P4,000,000 to MFG Company due 3 years after. The loan is supported by an 8% note receivable. Transaction costs incurred to originate the loan amounted to P248,000. P374,000 was chargeable to MFG as origination fees. Interest on the loan is collectible at the end of each year. The yield rate on the loan after considering the direct origination fees and origination costs incurred is 9.25%. JFG was able to collect interest as it became due at the end of 2024. During 2025, however, due to MFG Company's business deterioration and due to political instability and faltering global economy, the company was not able to collect amounts due at the end of 2025. After reviewing all available evidence at December 31, 2025, JFG determined that it was probable that MFG would pay back only P3,400,000 collectible as follows: December 31, 2027 December 31, 2028 December 31, 2029 December 31, 2030 P1,400,000 1,000,000 600,000…
Question 1 NewBank started its first day of operations (1 April, 2021) with $6 million in capital. $100 million in checkable deposits is received. The bank issues a $25 million commercial loan and another $25 million in mortgages, with the following terms:  Mortgages: 100 standard 30-year, fixed-rate with a nominal annual rate of 5.25% each for $250,000.  Commercial loan: 3-year loan, simple interest paid monthly at 0.75%/month. If required reserves are 8%, what does the bank balance sheets look like? Ignore any loan loss reserves. Question 2 NewBank decides to invest $45 million in 30-day T-bills. The T-bills are currently trading at $4,986.70 (including commissions) for a $5,000 face value instrument. What does the balance sheet look like? Question 3On the 3rd day of operations (3 April, 2021), deposits fall by $5 million. What does the balance sheet look like? Are there any problems? Question 4 To meet any shortfall in the previous question, NewBank will borrow the cash in the…
Question 1 NewBank started its first day of operations (1 April, 2021) with $6 million in capital. $100 million in checkable deposits is received. The bank issues a $25 million commercial loan and another $25 million in mortgages, with the following terms:  Mortgages: 100 standard 30-year, fixed-rate with a nominal annual rate of 5.25% each for $250,000.  Commercial loan: 3-year loan, simple interest paid monthly at 0.75%/month. If required reserves are 8%, what does the bank balance sheets look like? Ignore any loan loss reserves. Question 2 NewBank decides to invest $45 million in 30-day T-bills. The T-bills are currently trading at $4,986.70 (including commissions) for a $5,000 face value instrument. What does the balance sheet look like? Question 3On the 3rd day of operations (3 April, 2021), deposits fall by $5 million. What does the balance sheet look like? Are there any problems? Question 4 To meet any shortfall in the previous question, NewBank will borrow the cash in the…
Question 1 NewBank started its first day of operations (1 April, 2021) with $6 million in capital. $100 million in checkable deposits is received. The bank issues a $25 million commercial loan and another $25 million in mortgages, with the following terms:  Mortgages: 100 standard 30-year, fixed-rate with a nominal annual rate of 5.25% each for $250,000.  Commercial loan: 3-year loan, simple interest paid monthly at 0.75%/month. If required reserves are 8%, what does the bank balance sheets look like? Ignore any loan loss reserves. Question 2 NewBank decides to invest $45 million in 30-day T-bills. The T-bills are currently trading at $4,986.70 (including commissions) for a $5,000 face value instrument. What does the balance sheet look like? Question 3 On the 3rd day of operations (3 April, 2021), deposits fall by $5 million. What does the balance sheet look like? Are there any problems? (only ans question3 plz)
Question 1 NewBank started its first day of operations (1 April, 2021) with $6 million in capital. $100 million in checkable deposits is received. The bank issues a $25 million commercial loan and another $25 million in mortgages, with the following terms:  Mortgages: 100 standard 30-year, fixed-rate with a nominal annual rate of 5.25% each for $250,000.  Commercial loan: 3-year loan, simple interest paid monthly at 0.75%/month. If required reserves are 8%, what does the bank balance sheets look like? Ignore any loan loss reserves.
Problem 23National Bank loaned 5,000,000 to Bank net company on Jan. 1, 2018. The terms of the loan require principal payment of 1,000,000 each year for 5 years plus interest at 10%. The first principal and interest payment is due on Dec. 31, 2018. National Bank made the required payments on Dec. 31, 2018 and Dec. 31, 2019. However during 2020, Bank net began to experience financial difficulties and was unable to make the required principal and interest payment on Dec. 31, 2020. National bank projected the cash flows from the loan as of Dec. 31, 2020 as follows: Dec. 31, 2021, 500,000, Dec. 31, 2022, 1,000,000 and Dec. 31, 2023 1,500,000. At 10% PV factors are .9091 for one period, .8264 for two periods, and .7513 for three periods. What is the entry to recognize the impairment loss?
Question 18 A loan of $100,000 is to be repaid in annual repayments over 5 years. Assuming a fixed interest rate of 10% per annum compounded semi-annually, calculate the amount of each repayment. If your answer contains a decimal, round to 2 places. Question 19 A loan of $100,000 is to be repaid in annual repayments over 5 years. Assuming a fixed interest rate of 10% per annum compounded semi-annually, calculate the total amount of interest paid. If your answer contains a decimal, round to 2 places.
Problem 6-7 A builder is offering $139,371 loans for his properties at 9 percent for 25 years. Monthly payments are based on current market rates of 9.5 percent and are to be fully amortized over 25 years. The property would normally sell for $150,000 without any special financing. Required: a. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. b. At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan if the property is resold after 10 years and the loan repaid? Complete this question by entering your answers in the tabs below. Required A Required B At what price should the builder sell the properties to earn, in effect, the market rate of interest on the loan? Assume that the buyer would have the loan for the entire term of 25 years. (Do not round intermediate calculations. Round your final…