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Develop the repayment schedule

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Reference no: EM132680037

Yum Co, is a private-owned restaurant with a marginal tax rate of 25%, is considering borrowing $25 million to finance the construction of new restaurant facilities. The following information may be relevant to the decision:

Total Debt (prior to project financing) = $10 million

Total Equity = $18 million

Required return on equity = 10%

Cost of bank mortgage: 7.5% interest rate for 10 years

Level payment schedule, annual payments at end of year

Front end fees of $50,000

You should:

-Develop the repayment schedule, separating principal and interest

-Determine the net cash flows of the loan

-Calculate the effective interest rate on the loan

-Assess the effect of the borrowing on overall cost of capital of MWC

Reference no: EM132680037

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