Airjet Best Parts, Inc. Part 1

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Airjet Best Parts, Inc. Part 1

Finance | | | | | | | | | | Course Project - Part 1 - Task 1: Assessing loan options for AirJet Best Parts, Inc. | | | | | | | | | | | | | | | | Question 1: | APR (given) | EAR (calc) | | 2nd ICONV | | | | | | National First | 3.25 + 6.75 = 10% | 10.25 | | NOM = 10% | | | | | | | | | | C/Y = 2 (semiannual) | | | | | | | | | | EFF = 10.2500 | | | | | | | | | | | | | | | | | | | | | | | | | | Regions Best | 13.17 | 13.99 | | 2nd ICONV | | | | | | | | | | NOM = 13.17% | | | | | | | | | | C/Y = 12 (monthly) | | | | | | | | | | EFF = 13.9948 | | | | | | | | | | | | | | | | | | | | | | | | | | Question 2: | | | | | | | | | | I would recommend that AirJet Best Parts, Inc. take the loan that National First is offering since the interest rate is only compounded | | semi-annually, making it lower that that of Regions Best. The loan with National First has an Effective Annual Rate of 10.25, | | | whereas Regions Best 's EAR is calculated at 13.99%. If the loans with Regions Best is taken, AirJet would be paying 3.74% more | | than they would have with National First. | | | | | | | | | | | | | | | | | | | Question 3: | | | | | | | | | | AirJet Best Parts, Inc. Loan with Regions Best | | | | | | | | APR: 8.6% | Term: 5 years | | | | | | | | | Loan Amount $6,950,000 | | | | | | | | | | | | | | | | | | | N = 60 (12 x 5) | | | | | | | | | | I = .7167 (8.6/12) | | | | | | | | | | PV = $6,950,000 | | | | | | | | | | PMT = ?? | | | | | | | | | | FV = 0 | | | | | | | | | | | | | | | | | | | | The payment will be $142,926.43 (rounded) | | | | | | | | | | | | | | | | | | | I think that AirJet Best Parts, Inc. has made a good decision to choose

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