You have been appointed as a financial consultant by the directors of Cochin Holdings. They require you to calculate the cost of capital of the company. The following information is available on the financing of the company: · R10 000 000, financial lease due in 5 years and the current yield-to-maturity is 10%. Prepare a loan amortization scheduleq

You have been appointed as a financial consultant by the directors of Cochin Holdings. They require you to calculate the cost of capital of the company. The following information is available on the financing of the company: · R10 000 000, financial lease due in 5 years and the current yield-to-maturity is 10%. Prepare a loan amortization scheduleq

Name: You have been appointed as a financial consultant by the directors of
Uploaded: 2024-03-20T06:50:59.000Z
Channel: Bartleby
Description: You have been appointed as a financial consultant by the directors of Cochin Holdings. They require you to calculate the cost of capital of the company. The following information is available on the financing of the company:· R10 000 000, fin

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 17P

See similar textbooks

Similar questions

Suppose that you have generated the estimates listed below from a pro forma analysis for a company that had requested a three year loan. The loan is a $1.5 million term loan with the equal annual payments of principals. The P&I payments are due at the end of each year with the annual interest rate = Prime rate + 1.5%. Yr.1 Yr. 2 Yr. 3 Capital expenditure 250,000 125,000 75,000 Cash dividends 140,000 140,000 140,000 Cash flow from operations before interest expense 750,000 780,000 800,000 Assuming the Prime rate = 7.5% each year. What will be the interest payment at year 3? a). 25,000 b). 50,000 c). 45,000 d). 53,000 e). 10,000
The CFO of Kendrick Enterprises, is evaluating a 10-year, 7.6 percent loan with gross proceeds of $6,400,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be 2.7 percent of gross proceeds and will be amortized using a straight-line schedule over the 10-year life of the loan. The company has a tax rate of 23 percent and the loan will not increase the risk of financial distress for the company. a. Calculate the net present value of the loan excluding flotation costs. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. Calculate the net present value of the loan including flotation costs.
ABC Inc. asked your company for a 7-year loan of $50,000. The repayment of the loan will be as follows: ABC will pay $5,000 at the end of Year 1, $10,000 at the end of Year 2, and $15,000 at the end of Year 3, and fixed unspecified cash flow (assume X) at the end of each of the following years (Year 4 through Year 7). Assuming 8% as an appropriate rate of return on low risk but an illiquid 7-year loan. Find out the cash flow that this investment must provide at the end of each of the final 4 years (year 4 to year 7), that is, find out the X?
you invest $1,100,000 in equity into a property and the broker tells you that the property would produce a cash-in-cash return of 10%. it has a debt service of $85,000 annually. What is the net operating income?
Suppose a business takes out a $5, 000, five-year loan at 9 percent. The loan agreement calls for the borrower to pay the interest on the loan balance each year. Prepare an amortization schedule showing how the loan will be repaid. 2. State the criterion for accepting or rejecting independent projects under each of the following methods. - Profitability index - Discounted payback period - Accounting rate of return - Net present value - Payback period - Internal rate of return
A firm, whose cost of capital is 8 percent, may acquire equipment for $146,825 and rent it to someone for a period of five years. Note: Although payment of rent is typically considered to be an annuity due, treat it as an ordinary annuity when completing this problem in a spreadsheet or when using present value factors. If the firm charges $38,730 annually to rent the equipment, what are the net present value and the internal rate of return on the investment? Use Appendix D to answer the questions. Use a minus sign to enter negative values, if any. Round your answers for the net present value to the nearest dollar and for the internal rate of return to the nearest whole number. NPV: $ IRR: % Should the firm acquire the equipment? The firm acquire the equipment as the net present value is , and the internal rate of return the firm's cost of capital. If the equipment has no estimated residual value, what must be the minimum annual rental charge for the firm to earn the required 8…
You are an investor buying an existing office building. You determine that year 1 NOI will be $44,000 and that you the going in CAP rate is 4.1%. Using the Direct Capitalization approach, what is the estimated value of the building? You also determine that the Effective Gross Income will be $80,000 and the Effective Gross Income Multiplier is 13. What is the value using the EGIM muliplier approach? You also determine that the Annual Debt Service is 35,000. What is the Debt Service Coverage Ratio?
Visa Inc. asked your company for a 5-year loan of $50,000. The repayment of the loan will be as follows: Visa Inc. will pay $5,000 at the end of Year 1, $10,000 at the end of Year 2, and $15,000 at the end of Year 3, and fixed unspecified cash flow (assume X) at the end of each of the following years (Year 4 and Year 5). Assuming 8% as an appropriate rate of return on low risk but an illiquid 5-year loan. Find out the cash flow that this investment must provide at the end of each of the final 2 years (year 4 and year 5), that is, find out the X?
Suppose you are a relationship manager at an international bank. A customer who recently got admission at a prestigious Business School approached you for an education loan of Rs. 36,00,000. Your bank offers the education loan at 9.6 percent to be repaid in 10 years in EMIs. You are assigned the task of preparing the amortization schedule for the customer and answer the following. Prepare the amortization schedule for the first 5 EMIs. What will be interest paid for 93th EMI? What will be the loan balance after 93th EMI? What is the total interest paid for the loan?
Let's say you are a credit analyst in the asset management department of a large bank or insurance company. The credit department is researching an investment in a syndicated loan made to a large firm. The loan is an “amortized loan” with a 7% interest rate payable semi-annually. The original term was 10 years. For analytical purposes, assume the loan trades in $1000 increments. What are the semi-annual payments on the loan? * PLEASE USE EXCEL AND SHOW WHAT FUNCTIONS/FORMULAS YOU USED*
Cody Company wants to purchase an asset that costs $150,000. The full amount needed to finance the asset can be borrowed at 12% interest. The terms of the loan require equal end-of-year payments for the next 6 years. a) Determine the total annual loan payment. b) What is the total interest to be paid in year 4?
You are offered an asset that costs $150,000 and has cash flows of $1,350 at the end of every month for the next 6years. Assume the cost of capital is 9percent per year.a. What is the IRR of the asset?b. What is the NPV of the asset? c. If your cost of capital is 12percent, should you purchase it? (Setup cash flows in Excel spreadsheets and uses the following Excel Financial functions, IRR, and NPV to derive your answers.