4.4.3 Practice The Loan Ranger PDF

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4.4.3 Practice: The Loan Ranger Xing Chan Answer the following questions about different loan scenarios faced by businesses. Use the online loan calculator located at https://www.amortization-calc.com/auto-car-loan-calculator/ to help you do your calculations. 1. The owners of a successful restaurant want a loan for $50,000 to renovate the kitchen and expand the dining room. They expect that the extra tables will add between $2,000 and $5,000 to the restaurant’s monthly revenue. The bank is willing to let the business have an intermediate-term loan of $50,000 for five years at an interest rate of 6.5 percent. Calculate the monthly payment and explain whether taking this loan is a smart business decision. (10 points) The monthly payment would be about $978.31. This would not be a good decision as the monthly payment owed is quite high for a loan of this size (including interest).

2. A landlord wants to acquire an additional apartment building for $250,000. The new building contains eight apartment units, which will each rent for $500 per month. The bank is willing to loan the landlord the money for a long-term, 30-year loan at a 5.5 percent interest rate. Calculate the monthly payment and explain whether taking this loan for the new building is a smart business decision. (10 points)

The monthly payment would be about $1419.47. I believe taking this loan for a new building is a smart business decision as the requisite monthly payment is quite low.

3. An online store that has been successfully growing on its initial angel investment and revenue wants to invest $5 million to expand the business. The bank is willing to lend the business this money at a 10 percent interest rate over an eight-year term. Calculate the monthly payment and explain what the business must be able to do with this money in order for this to be a smart business decision. (10 points)

The monthly payment would be 75,870.82. The business must immediately begin finding profitable revenue streams in order to cover the monthly payments, or be forced to liquidate assets....