Types of loans requires periodic repayments

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Reference no: EM132005754

1. A proposed project has an initial cost of $200,000 and cash flows of –$13,200, $124,500, and $187,900 for Years 1 to 3, respectively. Victoria, the boss, insists that only projects that can return at least $1.10 in today's dollars for every $1 invested can be accepted. She also insists on applying a discount rate of 14 percent to all cash flows. Based on these criteria, the project should be

O rejected because the PI exceeds 1.

O rejected because the PI is 0.95.

O accepted because the PI is 0.89.

O rejected because the PI is 1.06.

O accepted because the PI is 1.17.

2. Which one of the following types of loans requires periodic repayments, each of which reduces the principal balance?

A. pure discount

B. none of the other answers

C. amortized

D. interest-only

Reference no: EM132005754

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