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Calculate the effective interest rate on the company loan

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Reference no: EM133158266

Question - A sportswear manufacturing company has embarked on a project to open new points of sale which requires an investment of $300,000. A financial institution granted him this amount as a debt over a period of 5 years. The interest rate applied to this loan is 4% with semi-annual capitalization.

a. Calculate the effective interest rate on the company's loan?

b. What is the monthly amount to be reimbursed by the company?

c. What is the amount of interest to be paid during the entire period of the loan?

d. What is the balance of the loan after 2 years?

e. The company expects to generate from this investment of $300,000 a constant income of $15,000 per year in perpetuity. Assuming a cost of capital of 0%, should the company accept this project?

Reference no: EM133158266

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