In order to start a coffee business, the Manager took a 300K loan from the bank....

In order to start a coffee business, the Manager took a 300K loan from the bank. He/she will have to pay 10K monthly for three years.

a-Calculate the effective interest rate (per year).

b-If the coffee business makes a Revenue=19K/month and has an operational cost of 12K/Month, Calculate the PW if the study period is 5 years and the MARR is equal to 1.5% per month.

Solve by spreadsheet.

Expert Solution

a) Cash Flow for each period for 36 months or 3 years = Loan amount - EMI

IRR formula was used to calculate effective interest rate which came out to be about 1.021% per month that means 12.252% per annum

b) Cash flow for each period for 60 months or five years= Loan amount-EMI+Revenue-operational cost

NPV formula was used to calculate PW of this stream which came out to be $ 300399.94 at MARR of 1.5% per month

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Rahul Sunny answered 8 months ago

In order to start this coffee business, the Manager took a 300K loan from the bank....

In order to start this coffee business, the Manager took a 300K loan from the bank. He/she will have to pay 10K monthly for three years. a-Calculate the effective interest rate (per year). b-If the coffee business makes a Revenue=19K/month and has an operational cost of 12K/Month, Calculate the PW if the study period is 5 years and the MARR is equal to 1.5% per month. Solve by Hand Please

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