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Math Help - Loan borrowing problem...help plz

  1. #1
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    Loan borrowing problem...help plz

    An investor wishes to borrow 50,000 from a bank at an effective rate of interest of 11% per annum
    to finance an expansion of his business. The project is expected to generate net revenues of 8,800
    per annum payable in arrears for the next 12 years.

    (a) Find the discounted payback period for this project.

    (b) Once the loan has been repaid, the investor can earn 4% per annum convertible monthly on
    investing the revenues received. Find the total profit that the investor will make at the end
    of the 12-year investment project.
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  2. #2
    MHF Contributor
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    Assuming 50,000 loan repaid at payment of 8,800 annually, 11% rate:
    owing end of year#9: 3,258.89 ;
    year#10 payment results in investment of 5,182.63 (overpayment) ;
    at 4% cpd monthly and annual deposits of 8,800 for 2 years: 23,572.05 .
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