Amortized loan that requires fixed principal payments

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Reference no: EM131967601

1. (NPV with varying required rates of return?) Gubanich Sportswear is considering building a new factory to produce aluminum baseball bats. This project would require an initial cash outlay of ?$5,000,000 and would generate annual free cash inflows of ?$1,200,000 per year for 7 years. Calculate the? project's NPV ?given:

a. A required rate of return of 8 percent

b. A required rate of return of 11 percent

c. A required rate of return of 13 percent

d. A required rate of return of 17 percent

2. Which statement applies to an amortized loan that requires fixed principal payments?

The interest is paid only at loan maturity.

The loan payments are an annuity due.

The final loan payment will equal the required principal payment amount.

The loan payments will be either an ordinary annuity or an annuity due.

The loan payments will decrease over time.

Reference no: EM131967601

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