Retirement of this indebtedness

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Rhyan has owned and operated Antilles Spice, a specialty restaurant in Boca Raton, for the past three years. Business has been good and he wants to expand into Fort Lauderdale and Miami. He develops a new detailed business plan and approaches two local investors about financing the expansion. These investors are not interested in equity ownership in restaurant businesses, but they agree to loan Rhyan $250,000, with the two new locations pledged as collateral. The investors realize that cash flow is important during the formative stages of new restaurants, so they structure the terms of the loan to help Rhyan with his cash flow. The annual interest rate will be 7.5% and the interest will compound monthly over the 4-year term of the loan. However, there will be no monthly payments; the note will be a so-called "balloon" note with the full amount of principal and interest due at the end of four years. In planning his cash flow for Antilles Spice, how much money will Rhyan need to set aside for the retirement of this indebtedness at the end four years?

Reference no: EM132139867

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