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Author Question: To expand its operation, the International Tools Inc (ITI) has applied for a 3,500,000 loan from the ... (Read 94 times)

Haya94

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on: Jul 10, 2018
To expand its operation, the International Tools Inc (ITI) has applied for a 3,500,000 loan from the International Bank. According to ITI's financial manager, the company can only afford a maximum yearly loan payment of 1,000,000.
 
  The bank has offered ITI, (1 ) a 3-year loan with a 10 percent interest rate, (2 ) a 4-year loan with a 11 percent interest rate, or (3 ) a 5-year loan with a 12 percent interest rate.
  (a) Compute the loan payment under each option.
  (b) Which option should the company choose?

Question 2

The responsibility for managing day-to-day operations and carrying out corporate policies belongs to the ________.
 
  A) board of directors
  B) chief executive officer
  C) stockholders
  D) creditors


briezy

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Reply #1 on: Jul 10, 2018
Answer to Question 1

(a)
(1 ) Using financial calculator: PV=3500000, N=3, FV=0, I = 10, CPT PMT = 1,407,402
(2 ) Using financial calculator: PV=3500000, N=4, FV=0, I = 11, CPT PMT = 1,128,304.32
(3 ) Using financial calculator: PV=3500000, N=5, FV=0, I = 12, CPT PMT =  970,873.79
(b) The company should choose option 3.

Answer to Question 2

B


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Haya94

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Reply #2 on: Jul 10, 2018
Correct answers!


briezy

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Reply #3 on: Jul 10, 2018
Great! Please up vote :D


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