What is the after-tax interest rate on loan

Assignment Help Business Economics
Reference no: EM131810302

To increase its market share, Sole Brother Inc. decided to borrow $50,000 from its banker for the purchase of newspaper advertising for its shoe retail line. The loan is to be paid in four equal annual payments with 15% interest. The loan is discounted 12 points. The first 6 "points" are an additional interest charge of 6% of the loan, deducted immediately. This additional interest 6%(50, 000) = $3000 means the actual amount received from the $50,000 loan is $47,000. Another 6 points or $3000 of additional interest is deducted as four $750 additional annualinterest payments. What is the after-tax interest rate on this loan?

Reference no: EM131810302

Questions Cloud

What would have been the effective annual after-tax interest : Sole is avoiding paying a fairly high price to retain the money owed shoe manufacturers. What would have been the effective annual after-tax interest rate?
Find formula for mode of the negative binomial distribution : Fix r and p and let P(k), k = 0, 1, . . denote the probabilities in the negative binomial (r, p) distribution.
Incremental state and federal income tax rate : A major industrialized state has a state corporate tax rate of 9.6% of taxable income. If a corporation has a state taxable income of $150,000
Verify the break-even point by preparing an income statement : Verify the break-even point by preparing an income statement for each product as well as an income statement for the combined products.
What is the after-tax interest rate on loan : Another 6 points or $3000 of additional interest is deducted as four $750 additional annualinterest payments. What is the after-tax interest rate on this loan?
How much is the materials cost per unit : How much is the materials cost per unit if ending work in process was 25% complete and total materials costs equaled $192,000?
Compute steve after-tax rate of return : (a) Compute Steve's after-tax rate of return on this dual bond-plus-loan investment package.
Find probability that your favorite team wins each game : Suppose two teams play a series of games, each producing a winner and a loser, until one team has won two more games than the other.
Discuss the basis in the property to the distributee : determine the impact on E&P; recognized gain, if any, to the distributing corporation; the amount of the dividend; and the basis in the property

Reviews

Write a Review

Business Economics Questions & Answers

  Two goods an increase in the price

In a world of two goods (say, x and y) an increase in the price of x which is accompanied by money compensation for the income effect alone will lead to:

  Determine the optimal monthly sales volume for this product

A large wood products company is negotiating a contract to sell plywood overseas. The fixed cost that can be allocated to the production of the plywood is $800,000 per month. The variable cost per thousand board feet is $155.50. For this situation, d..

  Capital budgeting promote financial health of organization

Critically reflect on the importance of capital budgeting. Why is this such a heated subject in many boardrooms? How does capital budgeting promote the financial health of an organization? How will you use the financial techniques you have learned th..

  When the? government outlays equal its tax? revenue

When the? government's outlays equal its tax? revenue, then the budget. When government outlays exceed tax? revenue, the situation is called a budget

  In a perfectly competitive market for electricity

In a perfectly competitive market for electricity, consumers’ benefit (in dollars) from consuming electricity is given by B(Q)= -Q2+1000 Q, where Q is the unit of electricity consumed. Derive the demand for electricity in this market.

  Differ for purchase of durable goods-non-durable goods

Explain what variables are most influential in predicting your level of spending as a consumer? Do the variables differ for the purchase of durable goods (automobiles, major appliances, etc.) versus non-durable goods (food, clothing, entertainment, e..

  Balance of inventory and the balance of depreciation

Brenda’s Bar and Grill has total assets of $16.0 million, of which $10.0 million are current assets. Cash makes up 10 percent of the current assets and accounts receivable makes up another 40 percent of current assets. What is the balance of inventor..

  Average-expected difference between the market return

What is a reasonable estimate of the market risk-premium in percentage (the average/expected difference between the market return and the risk-free rate)?

  What is difference between risk uncertainty and ambiguity

How does the analysis of risk aversion change when one allows for alternative models of decision-making then expected utility? How does subjective expected utility theory differ from expected utility theory? How might one elicit a subjective probabil..

  Determine the average monthly household expenditure

The management of a local restaurant wants to determine the average monthly amount spent by households in restaurants. Some households in the target market do not spend anything at all, whereas other households spend as much as $300 per month. What s..

  Global economic integration advanced through gatt

Explain why David Korten claims that "The global economic integration advanced through GATT and the World Trade Organization is at odds with the most basic principles of market economics."?

  Calculate the firm marginal revenue at the current price

A firm's demand curve is given by P = 500 - 2Q. The firm's current price is $300 and the firm sells 100 units of output per week. Calculate the firm's marginal revenue at the current price and quantity using the expression for marginal revenue that u..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd