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Daniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 6.00 percent loan with gross proceeds of $6,030,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be 2.20 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))
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))
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A gift shop sells Little Lentils -cuddly animal dolls stuffed with dried lentils -at a very steady pace of 10 per day, 310 days per year. The wholesale cost of the dolls is $5.00, and the gift shop uses an annual interest rate of 20 percent to com..
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