Business, 16.04.2021 17:50 sammiehammer

Daniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 6.1 percent loan with gross proceeds of $5,550,000. The interest payments on the loan will be made annually. Flotation costs are estimated to be 2.4 percent of gross proceeds and will be amortized using a straight-line schedule over the 10-year life of the loan. The company has a tax rate of 40 percent, and the loan will not increase the risk of financial distress for the company. Required:
a. Calculate the net present value of the loan excluding flotation costs.
b. Calculate the net present value of the loan including flotation costs.

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Daniel Kaffe, CFO of Kendrick Enterprises, is evaluating a 10-year, 6.1 percent loan with gross proc...

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