Question
In: Finance
Daniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 6.90 percent loan with gross proceeds...
|
Daniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 6.90 percent loan with gross proceeds of $5,100,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be 3.00 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 35 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 final answer to 2 decimal places. (e.g., 32.16)) |
| Net present value | $ |
| b. |
Calculate the net present value of the loan including flotation costs. (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
| Net present value |
$ |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
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interest payments on the loan will be made annually. Flotation
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amortized using a straight-line schedule over the 10-year life of
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