Assume that as a local government financial analyst you are asked to project the feasibility of a loan to a proposed public service venture for its start-up funding. The venture’s principals estimate that, at the end of 5 years, they will be able to pay back up to $800,000 from revenues accruing to the venture’s activities. Assuming that your organization’s current “average cost of capital” is 4.8% (the “discount rate”). Assuming monthly compounding, what is the maximum amount your government can commit to the venture for its start-up?
Assume that as a local government financial analyst you are asked to project the feasibility of a loan to a proposed public service venture for its start-up funding. The venture’s principals estimate that, at the end of 5 years, they will be able to pay back up to $800,000 from revenues accruing to the venture’s activities. Assuming that your organization’s current “average cost of capital” is 4.8% (the “discount rate”). Assuming monthly compounding, what is the maximum amount your government can commit to the venture for its start-up?
Expert Answer
Related Finance Q&A
Q: On January 1 of Year 1, Congo Express Airways issued $3,500,000 of 7% bonds that pay interest semian...
A: Calculation of Amount of Bond Discount:The bond premium is $10,087 for six months. The bond premium ...
Q: The potential loss incurred from purchasing a call option is finite, but the potential loss to the s...
A: Let's figure out the payoff to the seller or writer of the call option at the time of expiration of...
Q: A firm with sales of $500,000 has average inventory of $200,000. T he industry average for inventory...
A: Computation of inventory turnover:
Q: Boeing Corporation or Northrop Grumman, for Goldman Sachs. You are anaggressive investment portfolio...
A: Click to see the answer
Q: Whispering Pines Inc. is all-equity-financed. The expected rate of return on the company's shares is...
A: a.The opportunity cost of capital will still be 9.65%. Because the company is an equity financed com...
Q: Case Study #3: Chapter 6 Business Analysis - A business can be valued by capitalizing its earnings ...
A: You have asked a question with five sub parts. I will address the first three sub parts. Please post...
Q: A store will give you a 4.00% discount on the cost of your purchase if you pay cash today. Otherwise...
A: Let's assume the cost of purchase is C. On immediate payment,Discount = 4%Hence, the discounted cost...
Q: The prices of a certain security follow a geometric Brownian motion with parameters mu=.12 and sigma...
A: Let's pull together all the variables of Black Scholes Model:S = Current stock price = 40K = Strike ...
Q: The principal P is borrowed at a simple interest rate r for a period of time t. Find the simple inte...
A: If P is the principal amount, r is the simple interest rate per annum expressed in %age and t is the...
Q: If the volatility of a stock is .33, find the standard deviation of: (see the attachment for the rem...
A: Recall the Black Scholes model derivation.Log of the stock price is normally distributed.The expecte...
Q: The following numbers were randomly generated from a standard normal distribution: -0.25 0.3 ...
A: The formula for simulated price,S based on the initial closing price of S0 will be given by the equa...
Q: (#11) Genoa Company is considering a new investment whose data are shown below. The equipment would ...
A: Approach:We will first estimate the initial investment, i.e cash flow at t = 0We will then plot the ...
Q: Belotti Company just paid a dividend of $1.67 per share to its stockholders. Market analysts believe...
A: Calculation of Required Return:
Q: What capital components are typically included when estimating a firm’s corporate cost of capital? I...
A: Before we address the question, let's understand a bit about the capital itself.Capital:Capital is a...
Q: Assume a security follows a geometric Brownian motion with volatility parameter sigma=0.2. Assume t...
A: You have stated that "I got an answer of $3.00 for the cost of the call option" and then you have st...
Q: Stock in CDB Industries has a beta of 1.13. The market risk premium is 7.3 percent, and T-bills are ...
A: Expected dividend is computed and then dividend yield is computed.Cost of equity is eqqual to Divide...
Q: Storico Co. just paid a dividend of $1.45 per share. The company will increase its dividend by 24 pe...
A: D0 = $1.45;Year1 growth rate = g1 = 24%;Year 2 growth rate, g2 = g1 - 6% = 24% - 6% = 18%Year 3 grow...
Q: How long will it take for money to double if invested at 6% compounded quarterly?
A: Compounded Interest: It is the method of calculating interest at the initial amount of pri...
Q: Value/other investment criteria (i Saved Help Save Consider the following two projects: Cash flows P...
A: Hi. As per the guidelines we are allowed to answer the first four parts of a sub-part question. Kind...
Q: The future value of a $100 investment today at 8 percent annual interest compounded semiannually for...
A: Future Value It is the value of an investment after holding the same for specific amount of years ba...
Q: If the interest rate per day is 0.014%, then what is the annual rate?
A: Interest rate:An interest rate is a percentage on the principal amount at which a lender gives money...
Q: Hero Manufacturing has 8.5 million shares of common stock outstanding. The current share price is $7...
A: As a first step we need to calculate the weigthed average pre tax cost of debt based on the characte...
Q: What are investment assets ?
A: Investment Assets: Investment assets are termed as tangible or intangible things that are acquired f...
Q: Here are some historical data on the risk characteristics of Ford and Harley Davidson. Harley Davids...
A: Since you have asked a question with five sub parts, I will address the first three sub parts. Pleas...
Q: Assume Evco, Inc., has a current stock price of $39 and will pay a $1.80 dividend in one year; its...
A: Calculation of Expected Price:
Q: What is the effective, compound rate of interest you earn if enter into a repurchase agreement in wh...
A: Calculation of Compound Rate of Interest:The compound rate of interest can be calculated using a exc...
Q: Let C be the price of a call option to purchase a security whose present price is S. Explain why C ...
A: Options are derivative contracts and the amount that we pay to buy an option is called premium.
Q: Growth Company's current share price is $19.95 and it is expected to pay a $1.00 dividend per share ...
A: Since your question has multiple sub parts, I will address first three of them. Please post the bala...
Q: A devoted Indiana basketball fan needs $11,200.00 to attend the Final Four exactly one year from tod...
A: As a first step let's assign a symbol to each of the information we have:Future value, FV = $ 11,200...
Q: You bought a home for $150,000 and put down 10% and got a mortagage at an interest rate of 4.35% per...
A: We will make use of the PMT function in Microsoft Excel to determine the monthly payment on the mort...
Q: The level of the Syldavian market index is 21,300 at the start of the year and 25,800 at the end. Th...
A: Part (a)As a first step let's assign a symbol to all the information we have in the question.I0 = In...
Q: Block, S., Hirt, G., & Danielsen, B. (2017). Foundations of Financial Management. New York, NY: ...
A: a.Calculation of Break-Even point in bags:
Q: Simone's Sweets is an all-equity firm that has 9,100 shares of stock outstanding at a market price o...
A: As is situation: All equity, no debt, hence no interest payment, Let T be the tax rate.Hence, Pre ta...
Q: What is the present value of an annuity that pays $200 per month for 10 years if money is worth 5% c...
A: Present Value:It is the discounted value of cash flows of different period or sum of future money fr...
Q: ABC Enterprises' noncallable bonds currently sell for $1,048.50. They have a 5-year maturity, an ann...
A: The yield to maturity of a bond can be calculated using the RATE function in excel. Inputs are:Perio...
Q: You are considering a project with an initial cost of $7,800. What is the payback period for this pr...
A: Calculation of Payback Period:Using Excel Spreadsheet:
Q: Discuss the pros and cons of a 30 year, fixed rate loan. In addition, should Congress and state leg...
A: The following are some pros of a 30-year fixed rate loan:Higher tax deduction: The present tax laws ...
Q: Stu is working on a bid for a contract. Thus far, he has determined that he will need $218,000 for f...
A: Calculation of Operating Cash Flow:To calculate the operating cash flow, it is necessary to calculat...
Q: Ed Draycutt is the engineering manager of Airway Technologies, a firm that makes computer systems fo...
A: You have asked a case sudy with four sub parts. I will answer the first three sub parts. Please post...
Q: Assume that you were recently hired as assistant to Jerry Lehman, financial VP of Coleman Technologi...
A: Note:Since we are entitled to answer up to 3 sub-parts, we shall answer the first 3 as you have not ...
Q: Assume that you purchase a five-year, $1,000 par value bond, with a 6 percent coupon and a yield of ...
A: Calculating the current price of the bond. We have,Current price of bond = C [1 – (1 / (1+r)n ] / r ...
Q: Digital Organics (DO) has the opportunity to invest $1.06 million now (t = 0) and expects after-tax ...
A: Calculation of Total PV of Interest Tax Shield:Excel Spreadsheet:
Q: Please calculate the Sharpe measure for the S&P 500 over the last ten years if the standard devi...
A: Sharpe Ratio or Sharpe measure of a security = Return in excess of risk free rate / Standard deviati...
Q: 3. Bonds: The three parts of this problem are related. By studying prices of zero coupon STRIPS, you...
A: If rn andrSn+1 are the spot rates for the year n and n+1 respectively, then one year forward rate be...
Q: I have been working on the question below and I'm stuck on how to finish it up. I have provided wha...
A: The below are the possible considerations:It is characterized as a connection between the prices of ...
Q: Laura is saving for the college education of hertwochildren. They are two years apart in age; one wi...
A: As a first step let’s plot the cash flows on a time diagram.Please see the white board. In the table...
Q: There are two assets and two states of the economy. State of Probability Rate of Return Rate of Re...
A: Calculation of Expected Return of Portfolio:To calculate the expected return of portfolio, we need t...
Q: Shown below are the investment weights for the securities held in four different portfolios: three m...
A: a.Formula for calculation of active share (AS):
Q: Final Assignment Ed Draycutt is the engineering manager of Airway Technologies, a firm that makes co...
A: Evaluation of Ed’s analysis:Net present value is the one of the best techniques of capital budget as...
Q: And what are the expected returns for stocks A and B if the conditions are as follows? A0 0.03...
A: Calculation of Expected Return for Stock A:
