Foundations of Financial Management
16th Edition
ISBN: 9781259277160
Author: Stanley B. Block, Geoffrey A. Hirt, Bartley Danielsen
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 6, Problem 18P
Carmen’s Beauty Salon has estimated monthly financing requirements for the next six months as follows:
Short-term financing will be utilized for the next six months. Here are the projected annual interest rates:
a. Compute total dollar interest payments for the six months. To convert an annual rate to a monthly rate, divide by 12. Then multiply this value times the monthly balance. To get your answer, add up the monthly interest payments.
b. If long-term financing at 12 percent had been utilized throughout the six months, would the total-dollar interest payments be larger or smaller? Compute the interest owed over the six months and compare your answer to that in part a.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose you have a student loan of $45,000 with an APR of 12% for 20 years. Complete parts (a) through (c) below.
a. What are your required monthly payments?
The required monthly payment is $
(Do not round until the final answer. Then round to the nearest cent as needed.)
Suppose you have a student loan of $25,000 with an APR of 12% for 20 years. Complete parts (a) through (c) below.
a. What are your required monthly payments?
The required monthly payment is $
(Do not round until the final answer. Then round to the nearest cent as needed.)
b. Suppose you would like to pay the loan off in 10 years instead of 20. What monthly payments will you need to make?
The monthly payment required to pay off the loan in 10 years instead of 20 is $
(Do round until the final answer. Then round to the nearest cent as needed.)
c. Compare the total amount you'll pay over the loan term if you pay the loan off in 10 years versus 20 years.
Total payments for the 20-year loan = $
Total payments for the 10-year loan = $
Using the simple interest method, find the monthly payments on a $2,000 installment loan if the funds are borrowed for 30 months at an annual interest rate of 7%. You can use financial calculator, Excel. Round the answer to the nearest cent. Round the answer to the nearest cent.
$ per month
How much interest will be paid during the first year of this loan? Round your intermediate computations and final answers to the nearest cent.
$
Chapter 6 Solutions
Foundations of Financial Management
Ch. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Prob. 4DQCh. 6 - “The most appropriate financing pattern would be...Ch. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - What are three theories for describing the shape...Ch. 6 - Since the mid-1960s, corporate liquidity has been...
Ch. 6 - Gary’s Pipe and Steel Company expects sales next...Ch. 6 - Prob. 2PCh. 6 - Tobin Supplies Company expects sales next year to...Ch. 6 - Antivirus Inc. expects its sales next year to be...Ch. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Boatler Used Cadillac Co. requires $850,000 in...Ch. 6 - Biochemical Corp. requires $550,000 in financing...Ch. 6 - Sauer Food Company has decided to buy a new...Ch. 6 - Assume that Hogan Surgical Instruments Co. has...Ch. 6 - Assume that Atlas Sporting Goods Inc. has $840,000...Ch. 6 - Colter Steel has $4,200,000 in assets. Short-term...Ch. 6 - Prob. 13PCh. 6 - Guardian Inc. is trying to develop an asset...Ch. 6 - Lear Inc. has $840,000 in current assets, $370,000...Ch. 6 - Using the expectations hypothesis theory for the...Ch. 6 - Using the expectations hypothesis theory for the...Ch. 6 - Carmen’s Beauty Salon has estimated monthly...Ch. 6 - Prob. 19PCh. 6 - Eastern Auto Parts Inc. has 15 percent of its...Ch. 6 - Bombs Away Video Games Corporation has forecasted...Ch. 6 - Esquire Products Inc. expects the following...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Similar questions
- Compute the monthly payment on a car loan of $23,000 for 35 months, if the APR is 8.4%. Formula Excel Functon I need the formula as well as the excel function.arrow_forwardCreate an amortization table for a $60,000 loan. We will assume payments are made monthly over 6 years at an interest rate of 4%. a.) First use a formula cell in your spreadsheet to calculate the monthly payment amount. b.) Create an amortization table for the 72 months. Your columns of your amortization table should include payment number, payment amount, interest paid each month, principle paid that month, amount paid on principal total, and the amount of principal remaining.arrow_forward1. The two alternatives offered for the smartphone you will purchase are as follows.1. Payment plan: 6 months with 366.5₺ payment at the end of each month2. Payment plan: 12 months with a payment of 191.43₺ at the end of each montha) What is the monthly interest rate applied by the firm in the installment sales campaign?b) How many ₺ should be paid if the product is purchased in advance?arrow_forward
- Using the simple interest method, find the monthly payments on a $5,500 installment loan if the funds are borrowed for 30 months at an annual interest rate of 14% Use financial calculator to answer the question. Round the answer to the nearest cent. per montharrow_forwardConsider a loan of $7000 with an APR of 9% and a loan term of 10 years. Construct a table showing the interest payment and loan balance each month. Verify that with monthly payments of $88.67, the loan balance reaches $0 after 120 months.arrow_forwardAssume that you take out a $2000 loan for 30 months at 9% APR. What is the monthly payment? (Round your answer to the nearest cent.)arrow_forward
- Suppose you have a student loan of $35,000 with an APR of 12% for 30 years. The required monthly pament is ____arrow_forwardYour car loan requires payments of $1,000 per month over the next18 months and payments of $2,000 per month in the following 12 months. The effective annual interest rate charged is 12.6825% and the first payment begins in exactly one month. What is the present value of this 2.5-year car loan (i.e. how much does the loan cost you in today’s dollar)?arrow_forwardYou want to buy a bus. Cost is $180,000 with 10% down and the rest in 7 equal annual payments which include interest at 6%. The payments begin in one year. How much are the payments? Amortize the loan. Record the Journal Enteries.arrow_forward
- Assume you graduate from university with a $37,000 student loan. If your interest rate is fixed at 4.22% APR with monthly compounding and you will repay the loan over a 10-year period, what will be your monthly payment? The monthly payment will be $ (Round to two decimal places) CELLEarrow_forwardPLEASE DO THE FOLLOWING ON AN EXCEL SPREADSHEET: Consider a loan of $1,000,000 with the nominal annual interest rate of 10% compounded annually that must be paid off in 15 years. The loan fees include 2.0 points plus originating fee of $1,000. Calculate the loan monthly installments and APR of the loan.arrow_forwardYou have taken out a loan of $32,000 to buy a new Saturn. The loan will be paid off in monthly instalments starting in one month over the next 4 years (48 payments). The interest rate on the loan is a stated rate of 8.25% per year. The bank doesn’t tell you, but it is compounded quarterly. Find the amount of the monthly loan payment. Please show your work using PV formulaarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (...FinanceISBN:9780357033609Author:Randall Billingsley, Lawrence J. Gitman, Michael D. JoehnkPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning
Responsibility Accounting| Responsibility Centers and Segments| US CMA Part 1| US CMA course; Master Budget and Responsibility Accounting-Intro to Managerial Accounting- Su. 2013-Prof. Gershberg; Author: Mera Skill; Rutgers Accounting Web;https://www.youtube.com/watch?v=SYQ4u1BP24g;License: Standard YouTube License, CC-BY