How much should the lender be repaid

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Reference no: EM131939932

Seventeen years ago, the Archer Corporation borrowed $6,450,000. Since then, cumulative inflation has been 95 percent (a compound rate of approximately 4 percent per year).

a. When the firm repays the original $6,450,000 loan this year, what will be the effective purchasing power of the $6,450,000? (Hint: Divide the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.)

b. To maintain the original $6,450,000 purchasing power, how much should the lender be repaid? (Hint: Multiply the loan amount by one plus cumulative inflation.) (Do not round intermediate calculations and round your answer to the nearest whole dollar.)

Reference no: EM131939932

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