A company lends money to small businesses. The total amount per project is $ 50,000. The borrowers can benefit for once from this deal. Mr. Roger applies for a loan, and gets $ 40,000 according to his business' conditions. He needs $ 60,000 for his project, so he finances the needed money from his own money. The interest rate applied by the company on the loans is 5%, and Mr. Roger wants to remunerate himself for 3% on his own participation. Find the capital structure for the project of Mr. Roger What is the average cost of capital for Mr. Roger (in %) If Mr. Roger can repay only $ 30,000 to the company, what would be the credit risk for the company?

A company lends money to small businesses. The total amount per project is $ 50,000. The borrowers can benefit for once from this deal. Mr. Roger applies for a loan, and gets $ 40,000 according to his business' conditions. He needs $ 60,000 for his project, so he finances the needed money from his own money. The interest rate applied by the company on the loans is 5%, and Mr. Roger wants to remunerate himself for 3% on his own participation. Find the capital structure for the project of Mr. Roger What is the average cost of capital for Mr. Roger (in %) If Mr. Roger can repay only $ 30,000 to the company, what would be the credit risk for the company?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 8E

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