Question

I need help in tehse questins.. Please solve them 100% and please also show the steps so i can easily write in in word.. try to solve in word and please show steps so i can solve them.

12. Bubba has got in a tough spot and has to come up with some money quickly to pay off his ex-wife. The local loan shark has agreed to give him a loan of $10,000 at an agreed on rate of 15%. The shark reminded him that he uses continuous compounding on all loans. Bubba was desperate and took the loan but now is concerned. What is the effective rate he will be paying and if the loan is amortized over a four year period what is the annual loan payment? 13. After a long drought, the manager of LB Farm is considering the installation of an irrigation system which will cost $65,000. It is estimated that the irrigation system will increase revenues by $20,500 annually, although operating expenses other than depreciation will also increase by $5,000. The system will be depreciated using the 5 year MACRS schedule and it is assumed it will have zero market value at the end of its five year economic life. If the tax rate on ordinary income is 40 percent and the firm's cost of capital is 2%, due to a subsidized loan program, what is the project's NPV, IRR and MIRR and should it be accepted?

Answer 1

NOTE: In case of multiple questions only first one will be answered.

P= principle $10000

R= rate 15%

T= time 4 years

year 1 : int= 10000*15%*1=1500

Total = 10000+1500=11500

year 2 : 11500*15%*1=1725

total= 11500+1725=13225

Year 3 : 13225*15%*1=1983.75

total= 13225+1983.75=15208.75

year 4 : 15208.75*15%*1=2281.31

total= 15208.75+2281.31=17490

Total payment at the end of 4 years will be $17490

Effective interest rate= 17490= 10000*4*r/100

r= 17490*100/(10000*4)

r = 43.725%