# Compute annual payment

Intermediate term loan for 1,000,000 to be paid off in equal installments at the end of each of the next 5 years. The interest rate is 14%, what is the annual payment.

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#### Solution Preview

We have to use annuity formula to solve the problem.

PVA = W x 1 - 1 where PVA is the present value of loan

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#### Solution Summary

This solution is comprised of a detailed explanation to answer what is the annual payment.

Finance: Compute annual interest payment, required rate of return, NPV of project,

1. A corporate bond has a coupon rate of 12%, a yield to maturity of 10.55%, a face value of $1,000, and a market price of $850. Therefore, the annual interest payment is:

Answer is A) 101.75 B) 102 C) 105.50 D) 120.00

2. Johnstown Supply Corporation stock is currently selling for $58.00. It is expected to pay a dividend of $5.00 at the end of the year. Dividends are expected to grow at a constant rate of 7.5% indefinitely. Compute the required rate of return on Johnstown Supply Corporation stock.

Answer A) 12.48% B) 15.65% C) 13.64% D) 16,12%

3. Burns and Nuble is considering an investment in a project which would require an initial outlay of $350,000 and produce expected cash flows in years 1-5 of $95,450 per year. You have determined that the current after-tax cost of the firm's capital (required rate of return) for each source of financing is as follows: Cost of long term debt is 7%, Cost of preferred stock is 11% and cost of common stock is 15%. Long term debt currently makes up 25% of the capital structure, preferred stock 15%, and common stock 60%. What is the net present value of this project?

Answer A) -9,306 B)2,149 C 5,983 D) 11,568