You are considering an investment that requires you to spend $150,000 today and receive $200,000 in 10 years. The cost of funds from a bank is 4.5% per year if you have collateral and 6.8% if you do not. Would you turn to an informal credit market to access funds at 8.3% if you did not have collateral? Support your answer with some computations.

You are considering an investment that requires you to spend $150,000 today and receive $200,000 in 10 years. The cost of funds from a bank is 4.5% per year if you have collateral and 6.8% if you do not. Would you turn to an informal credit market to access funds at 8.3% if you did not have collateral? Support your answer with some computations.

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 13E: Buena Vision Clinic is considering an investment that requires an outlay of 600,000 and promises a...

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